BORROWERS Mortgage Commentary 18 / 2015
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Issue 2015 /18       16 October 2015

Welcome to the eighteenth fortnightly General Finance Mortgage Commentary for 2015.  We aim to keep you informed on developments at General Finance Home Loans and the mortgage market in general.  

The Money Market
This morning (9am on 16 October 2015) the money markets were at the following levels:
Official cash rate    2.75% (unchanged)
90 day bill rate       2.85 (up from 2.84)
1 year swap rate    2.73 (up from 2.70)
3 year swap rate    2.81 (up from 2.79)
10 year bond rate   2.98 (up from 2.97)
NZ/US dollar      0.6867 (up from 0.6397)

US Interest Rates
Last month the US Federal Reserve reviewed its official cash rate, and left it unchanged at 0.25%, or a quarter of a percent.  This surprised a number of commentators, as most thought that it was time to increase it. It appears that the authorities were hesitant to increase the rate, despite the USA economy growing reasonable well, due to the uncertainly of growth expectations in China. They have since come out to calm the financial markets, saying they will look at it again later this year and probably increase it. All this will have little effect on our interest rates but it may cause the USA dollar to strengthen slightly against ours.

What is Equity Crowdfunding?
The above term, previously only seen in the financial press, is now being seen in main stream media. Equity crowdfunding service providers are licensed by the Financial Markets Authority under the new Financial Markets Conduct Act. There has been a rush of registrations and there are now 7 licensed providers. So what is equity crowdfunding? It is a mechanism enabling a broad group of investors, to fund start up and growing businesses, in return for equity (that is, shares in that enterprise). There are limits as to how much can be raised annually. We believe that potential investors need to be careful. Crowdfunding rules make it quicker and easier for small companies to raise money. Instead of detailed documents that companies usually have to publish when raising money from the public, they only have to provide basic information on the crowdfunding service website.  We are concerned that potential investors will find it hard to do the necessary due diligence. It should be noted the riskiest businesses to invest in are start ups or those companies in their infancy stages. Conversely, if things go well, returns can be good. We believe equity crowdfunding is fashionable (a bit like non-prime mortgages were ten years ago) and not adequately regulated. We are concerned that investors may not be fully informed of the risks. We advise caution.

Ranking of our Universities
In the latest rankings by Quacquarelli Symonds, an international consultancy agency, specialising in ranking universities from around the world, Auckland University made it into the top 100 at 82. This is a great achievement. The only universities that make it into the top 100 are in the advanced countries and in Asia. There is no university in Central and South America, India, the entire Muslim world and Africa that makes it into the top 100. Auckland does. What this means, is that New Zealand, and particularly Auckland, will continue to receive an increasing number of temporary migrants who wish to study here.  Two other New Zealand universities made it into the top 200 - Otago andCanterbury. 

Poor Credit - We Can Assist
We are noticing that some prime rate lenders are declining loans for relatively minor credit issues.  This is where we can assist. Rather than not doing the deal and assisting the client, why not bridge it with us for six to twelve months, and let the previous credit issues become history. Provided our payments are met on time, then after a suitable period with us, these loans should be able to be refinanced to a main stream lender.

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.