Issue 2011 / 2   25 February 2011

Welcome to the first fortnightly General Finance Mortgage Commentary for 2011.  We aim to keep you informed on developments at General Finance Home Loans and the mortgage market in general.  Previous issues of this commentary can be found on our website http://www.general.co.nz/newsletters.htm

The Money Market
This evening (4pm on 24 February 2011) the money markets were at the following levels:
Official cash rate         3.00% (unchanged)
90 day bill rate            2.92 (down from 3.22)
1 year swap rate          3.00 (down from 3.41)
3 year swap rate          3.85 (down from 4.16)
10 year bond rate        5.55 (up from 5.49)
Kiwi dollar      0.7475 (down from 0.7712)
 

Lowering the OCR is More Urgent
In our last newsletter we suggested the Reserve Bank should immediately lower the OCR. This has become more urgent. In the past fortnight we have had a severe earthquake in Christchurch plus more protests across North Africa and the Middle East. These protests are affecting the price of oil and if they continue much longer we will start to see a series of petrol price hikes in this country, which is never good for the economy. Our supposed recovery is not happening, so the Official Cash Rate (OCR) should be lowered.  

Boarding Houses
Landlords, or people contemplating owning boarding houses, should be aware that there have been some recent changes to the Residential Tenancies Act, which gives tenants of these establishments the same rights as those in other rented dwellings.  To qualify for this protection the tenancy has to be for more than 28 days.  Landlords can now ask for the normal bond, which is sensible. Secondly if the tenancy agreement is for more than 28 days then there must be a written tenancy agreement. Boarding houses are a popular investment with some landlords as they offer a higher yield than other rental dwellings but there is considerably more management time involved.  

Checking Your Insurance 
After the devastating news about Christchurch, it is a timely reminder for everyone to check their insurances and in particular their house and contents policies. Is your policy current? Does it cover everything? It is a good idea to make a list of all your chattels (by room) and put an approximate value on them. If they were all destroyed, by say a fire, does your contents policy cover them all?  Another often-overlooked point - is the correct entity covered by your policy? For instance if your house is actually owned by a family trust then this should be the name on your policy. If you have any questions or concerns, now is the time to contact your insurance advisor or company. 

Useful Website
We often hear people say, back in 1980 a car cost so much, a house so much, and that we were better off then than now.  Similarly we know that air travel and electronic appliances were relatively more expensive forty years ago than today.  There is a website that is easy to use that puts all this into perspective.  It is the inflation calculator prepared by the Reserve Bank at http://www.reservebank.govt.nz/statistics/0135595.html. Here you can enter the price of something from several years ago and the calculator will compute the equivalent value in today’s dollars. The dates go back as far as 1862 and it is New Zealand specific. This website is well worth a look.

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.