BORROWERS Mortgage Commentary 22 / 2015
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Issue 2015 /22       11 December 2015

Welcome to the twenty-second 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 11 December 2015) the money markets were at the following levels:
Official cash rate    2.50% (down from 2.75%)
90 day bill rate       2.76 (down from 2.88)
1 year swap rate    2.70 (up from 2.68)
3 year swap rate    2.85 (up from 2.77)
10 year bond rate   3.54 (up from 3.19)
NZ/US dollar      0.6750 (up from 0.6573)

Official Cash Rate
Yesterday the Reserve Bank decreased the Official Cash Rate from 2.75% to 2.5%.This was due to a weaker economy, both globally and at home. Inflation is posing no threats, as it currently around a low 1%.  The Reserve Bank would like to see some easing of our exchange rate to assist our exporters.  Further easing has not been ruled out but this depends very much on the performance of our economy, how or if we are affected by the El Nino draught and how our dairy prices go.  This is good news for those with mortgages; floating rates are expected to decrease by a quarter of a percent, whereas this rate cut has already been priced into the fixed rate mortgages.

2015 in Review
This year has been business as usual for us. Deposit growth (i.e. the money we receive from the public) has performed well. We thank our depositors for this. Lending has been in two parts - demand was steady during the early part of the year and is now, however around the middle of the year, things were quieter. One trend we are seeing this year, and it is more obvious than in previous years, is that more Aucklanders are cashing up their properties, and moving to provincial areas. This is not surprising and is now a retirement option for some.  

Crystal Ball for 2016
The financial markets are always difficult to predict with interest rates, exchange rates and commodity prices constantly changing. But we see some trends. Interest rates will continue to stay low. The Official Cash Rate, as mentioned above, is now at 2.50%. This means that the economy is slightly weaker than anticipated. The Governor of the Reserve Bank is hoping for some strengthening of our economic activity over the Christmas period, and the early part of next year. If this is not forthcoming, then a further rate cut next year, is likely. A conundrum for the western world is, that despite interest rates having been low for several years, and oil prices dropping all year (and forecast to continue to ease), global economic activity is still relatively subdued.  Growth in this country will remain low until dairy prices pick up, despite other sectors such as tourism performing well.  Inflation is certainly not an issue, although oddly, it is in some countries, where it is now considered too low. Overall we are predicting another year much like the current one, albeit with softer interest rates.   

Next Year for Us
We have improved some of our lending limits. We have increased our single exposure limit to $800,000 from $550,000. We can now lend up to 70% on sections in major metropolitan areas (this is up from 50%). Areas that differentiate us from other lenders include:
• we lend throughout the country
• we are happy to look at larger lifestyle blocks, greater than ten hectares
• we aim to turn around your application quickly

 As this is our last newsletter for the 2015, we wish everyone a Merry Christmas and a Happy New Year. Our next newsletter will be on 12 February 2016. We appreciated your support this year and look forward to working with you in 2016.

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.