BORROWERS Mortgage Commentary 20 / 2015
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Issue 2015 /20       13 November 2015

Welcome to the twentieth 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 13 November 2015) the money markets were at the following levels: 
Official cash rate    2.75% (unchanged)
90 day bill rate       2.90 (down from 2.97)
1 year swap rate    2.79 (up from 2.78)
3 year swap rate    2.88 (up from 2.83)
10 year bond rate   3.24 (up from 2.99)
NZ/US dollar      0.6546 (down from 0.6760)

The Auckland Market is Slowing
In talking with a number of real estate agents, there appears to be some slowing in the Auckland property market. The first signs are that auction clearance rates are down, and there are fewer overseas investors looking at property. This is logical, as non resident investors now need to provide more information about their backgrounds, plus they are required to have a New Zealand bank account  (which is not easy to obtain) and a tax file number. Local investors are still active, but may become increasingly choosy, due to a view that Auckland property may be peaking in the short term, and that property yields are looking much more attractive in other cities such as Hamilton and Wellington. 

New Bank Notes are Here
Last month, new bank notes of $5 and $10 denominations were put into circulation. The new notes are only added as required. This is why most people have not seen any of the new notes. This will start to change. The older style notes remain legal tender and can be used as freely as the new ones. The new $20, $50, $100 notes are yet to be released. The Reserve Bank has declined to add a higher denomination note, such as a $200. This is probably due to the fact that higher denomination notes are more likely to be used for money laundering, forged or used for criminal activities. The $100 note, first introduced in 1967, was infrequently used, and was worth considerably more (around $1,700 in today’s dollars) than the same note is now. 

Rates Will be Cut
We believe that there will be an interest rate cut before Christmas. There are several reasons for this. Unemployment has risen to over 6%, for the first time in three years. This signifies that growth is slowing, particularly in some provincial areas. There are concerns about our high exchange rate, which does have an impact on the exporting sector. Dairy prices remain subdued. There are no inflationary pressures. Consumer spending is a bit slower and this is reflected in credit card use. Taking into account the above factors, and noting an apparent slowing of the Auckland property market, a rate cut before Christmas is most likely. 

Traditional Bridging
We are seeing more of these transactions. In a number of centres, buyers are having increasing difficulty finding exactly what they want. More people seem to taking the opportunity to buy, even though they have not sold their current home.  The banks are doing some of these transactions, but for those who cannot be accommodated by their lender, we are happy to assist.   We do not require a conditional sale - we are happy to allow the borrower to spend several months marketing their existing property in order to get the best possible price.

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.