BORROWERS Mortgage Commentary 22 / 2014
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Issue 2014 /22       5 December 2014

Welcome to the twenty-second and final 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 (9 am on 5 December 2014) the money markets were at the following levels:
Official cash rate    3.50% (unchanged)
90 day bill rate       3.67 (unchanged)
1 year swap rate    3.74 (down from 3.76)
3 year swap rate    3.94 (down from 4.03)
10 year bond rate   3.88 (down from 4.06)
NZ/US dollar      0.7785 (down from 0.7875)

2014 in Review
This year has been a steady one for us. On the deposit side, more people have been investing with us and existing clients are staying and rolling over their investments (and in many cases adding to their original sum). It is pleasing to have new investors approaching us.  The housing market is divided into two distinct groups. Both Christchurch and Auckland are particularly active, whereas the rest of the country is subdued. Our lending book is continuing to grow.

Crystal Ball for 2015
As we operate in the financial markets every day, we do get to observe certain trends that are likely to have an impact next year. The first is that interest rates have probably peaked, certainly in the short term (and over the next twelve months). Inflation is low and if lower oil prices persist, inflation will remain low. Although our economy is seeing reasonable growth, this will remain relatively modest - although better than many of our trading partners. Our population will continue to increase, which is positive for growth.  New Zealanders are deciding that this is not a good time to be going overseas, while others are returning.  Immigration is continuing.  Unemployment is likely to ease a little, but most new jobs (perhaps over 70%) are being created in the greater Auckland region. In order to get work, people will have to move from the provincial areas to Auckland. The exchange rate is always hard to predict, as it is not solely based on what we do.  If an economy, such as the USA, grows more than ours, it is fair to say that our currency will depreciate compared with theirs. We believe that next year will be very similar to this year.  

Non-Residents Buying Our Houses
There is some concern mounting, at a Government level, that non-resident buyers may be shutting out Kiwi buyers from the property market. In the more depressed regions of the country, foreign buyers are probably an asset, but in Auckland this may not be the case. The easiest solution to all this is to adopt what happens in both Australia and Singapore. Non-residents can only purchase new dwellings and not second hand ones. This has two advantages. It increases demand for new dwellings, so more are built, boosting the construction industry and employment.  It allows local residents to have access to all the available second hand stock.  This is not that difficult to implement.

Low Doc Lending
We are approving a number of traditional low doc loans, for those that are unable to confirm their income. Some may not have any income at the moment but have a good asset position.  They anticipate being able to repay us through the sale of these assets or though future employment. Another group, for whom we are approving these loans, is that with poor credit, who are expected it to improve over time.We would like to wish all our clients, past clients, introducers and supporters a very Merry Christmas and all the best for 2015. Our next newsletter will appear on Friday 13 February 2015.


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.