Issue 2015 /16       18 September 2015

Welcome to the sixteenth 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 18 September 2015) the money markets were at the following levels:
Official cash rate    2.75% (down from 3.00)
90 day bill rate       2.83 (down from 2.91)
1 year swap rate    2.68 (down from 2.78)
3 year swap rate    2.81 (down from 2.88)
10 year bond rate   3.01 (up from 2.97)
NZ/US dollar      0.6368 (down from 0.6398)

Tougher Tenancy Laws May Come
The percentage of those owning their homes in New Zealand has fallen from around 74% in the early 1990s to around 66% today. In Auckland this figure is lower, and maybe around 55%. This means around 45% of home occupants will be renting, and this figure is increasing.  There is a real risk to landlords, that a Government or an opposition party may introduce or propose tougher tenancy laws, as exist in the UK and Europe, in order to attract voters.  It is important to make the current system work, despite its flaws, as an alternative regime will only be tougher and more costly. 

New Bank Notes
By mid next month we will start to see our new bank notes – initially the $5 and $10 notes. This is the sixth change to our bank notes since they were first issued by the Reserve Bank in 1933. The purpose of the change is to make them more sophisticated and therefore more difficult to counterfeit. While New Zealand does not have a big problem in this area, some jurisdictions do.  For instance, if you take a 50 Euro note into some shops in France or Spain, they will check it to ensure that it is genuine. The $5 note will be retained. It could have been converted to a coin like to $1 and $2 notes were back in 1990. Existing notes will still be accepted. More details are available at http://www.rbnz.govt.nz/notes_and_coins/banknote_upgrade/. 

KiwiBank Could Do More
After thirteen years KiwiBank has only just paid its first dividend to the Government. It has done little in the way of innovation, and is largely copying the main trading banks, often pricing a little below them. It has failed to address certain issues unique to New Zealand, which a home grown bank should have addressed.  This is the near prime part of the market where borrowers may have slightly irregular income (e.g. consulting income or seasonable income) making it hard for them to borrow, yet they can still service their mortgages. There are many micro and small businesses or franchises that want to borrow to fund expansion but are unable to. A business finance product would be innovative.  There is still a lot more that KiwiBank can do. 

Short Term Mortgages
Earlier this month we decreased our mortgage rate to 10.95% for unregulated loans. We are a short term lender, which means we are happy to approve loans for a few weeks to up to two years. In the unregulated space, we lend for all sorts of purposes, including bridging transactions, no financials, asset lends and debt consolidation. We still look at regulated loans but servicing has to be confirmed.

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.