Issue 2016 / 20 11 November 2016
Welcome to the twentieth fortnightly General Finance Mortgage Commentary for 2016. 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 November 2016) the money markets were at the following levels:
Official cash rate 1.75% (down from 2.00)
90 day bill rate 2.09 (down from 2.14)
1 year swap rate 2.13 (up from 2.09)
3 year swap rate 2.42 (up from 2.23)
10 year bond rate 3.00 (up from 2.69)
NZ/US dollar 0.7207 (up from 0.7122)
Official Cash Rate
Predictability the Reserve Bank decreased the OCR from 2.00% to 1.75% yesterday. This was widely expected by the market. Perversely, it will have no affect on mortgage rates. They have in fact been increasing in the past fortnight. They will likely increase again over the next two months. Deposit rates too will actually rise. This is because banks are wishing to increase their local retail deposits. The main way to do this, is to increase their interest rates. The Reserve Bank also signaled the end of the easing cycle. This has pushed the New Zealand dollar up, further hurting our exporting sector.
Tenants in Your Own Home
Across the country new councils have been elected. One major issue that looms for virtually all of them, is how to fund their infrastructure spending. This includes sewerage, water, footpaths, buses, rail and the like. Currently, councils use the most unimaginative method of just increasing rates. We believe that this is no longer possible. For many elderly or those on lower incomes, rates are often their single largest cost. If rates continue to increase, many people will literally become tenants in their own homes. They will be paying rates to the council on a fortnightly or monthly basis, just like a tenant does to a landlord. All councils must look at more innovative and equitable ways to pay for their increasing costs.
KiwiSaver
There is no denying that KiwiSaver has been a success, with around three quarters of working Kiwis enrolled in the scheme. It has now been operating for nearly ten years and some people have built up reasonable balances. A positive feature is that potential first home buyers can operate it a bit like a home ownership account. These were popular in the 1970s and early 1980s with the Trustee Savings Banks and Building Societies, where if you built up a reasonable savings history, you were given priority to relatively scarce mortgage finance. The beauty with KiwiSaver is that you can use it as a savings vehicle to assist with the deposit on your first house.
Investing With Us
General Finance is a licensed non-bank deposit taker. This means that the general public is able to place funds with us. Our two year rate is 5.50% and our three year rate is 5.75%. Just compare this with your trading banks and you can see that these are good rates. We are happy to pay interest on a monthly basis, for deposits over $10,000.
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.