BORROWERS Mortgage Commentary 09 / 2014
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Issue 2014 / 9   6 June 2014

Welcome to the ninth fortnightly General Finance Mortgage Commentary for 2014.  We aim to keep you informed on developments at General Finance Home Loans and the mortgage market in general. 

The Money Market
This morning (10am on 6 June 2014) the money markets were at the following levels:
Official cash rate    3.00% (unchanged)
90 day bill rate       3.45 (up from 3.40)
1 year swap rate    3.68 (up from 3.67)
3 year swap rate    4.14 (down from 4.18)
10 year bond rate   4.35 (up from 4.29)
NZ/US dollar      0.8496 (down from 0.8580)

Mortgage Rates
The Governor of the Reserve Bank will review the OCR next week, and he will most likely increase it by a further quarter of a percent. Looking further out, longer dated bond and swap rates are not increasing by the same amounts.  The ten year bond rate is 4.35% today. This is implying that there may not be as many OCR increases, over the next twelve months, as was envisaged earlier this year. This is due to the Auckland property market easing, the domestic economy not growing as quickly as originally thought and an easing of dairy prices. This is positive for those with mortgages, and the two year fixed rates may actually stabilise around 7%, lower than the 8% being talked about earlier this year.

Residential Construction Activity Increasing
The house building activity across the country grew at its fastest pace in almost twelve years, for the first quarter of this year. Most of this new construction is occurring in two cities only - Auckland and Christchurch. This is significant, as it shows that insurance money is being released. On a wider front, construction is most positive for the economy. This industry employs a large number of people, both skilled and semi-skilled. Anyone returning to this country, or new immigrants with construction related skills, will notice a demand for their experience.

Auckland Investor Market
Last week interesting comments were made by the NZ Institute of Economic Research, a long established economic consultancy. They were saying that house prices were rising, in Auckland, due to high investor demand, rather than due to a shortage of properties. This is further evidenced by rentals remaining relatively stable over the past year in Auckland. If there was a real shortage of property, then you would be seeing rentals rising as well.  We believe that there is some truth in what they are saying - investors prefer residential rental properties to other investment choices or there may not be other choices available. One way to slow the Auckland property down, and thinking outside the square, is to list more companies on our stock exchange.  This will make more investment opportunities available to the ordinary New Zealanders.

If You Have Surplus Funds
Why not look at a term deposit with our finance company. General Finance Limited is a non-bank deposit taker, meaning that we receive funds from the general public. We offer debenture terms from 6 months, up to 5 years. Our most attractive rates of 6.50% are offered for 2 and 3 year terms. Interest is paid out quarterly, but for deposits over $10,000 we offer a monthly payment option. This is a great choice, particularly for those who are retired, but would still like a regular income. Enquiries are welcome, and we are more than happy to send you a copy of our prospectus and investment statement. 

Mortgage Interest Rates
For updated mortgage interest rates, either for new business or applicable to your existing loan, please contact your Lender (below) or the General Finance Limited Loan Administration Department.

As everyone's personal circumstances are different and the tax treatment of their affairs is always determined by their own circumstances, you should not act on any comments made in our Commentary without obtaining your own independent professional advice.

General Finance Limited is a Registered Financial Services Provider, with registration number  FSP8882.