Issue 2012 / 3 16 March 2012

Welcome to the third fortnightly General Finance Mortgage Commentary for 2012. We aim to keep you informed on developments at General Finance Home Loans and the mortgage market in general.

The Money Market
This evening (4pm on 15 March 2012) the money markets were at the following levels:
Official cash rate 2.50% (unchanged)
90 day bill rate 2.75 (unchanged)
1 year swap rate 2.85 (down from 2.87)
3 year swap rate 3.40 (up from 3.32)
10 year bond rate 4.22 (up from 4.11)
Kiwi dollar 0.8106 (down from 0.8354)

Official Cash Rate
The Reserve Bank reviewed the official cash rate on 8 March and left it unchanged at 2.5%. What was said in their Monetary Policy Statement is important. The Governor is saying that there is little inflation risk for the country at the moment, the domestic economy is showing some small signs of recovering and our relatively high exchange rates will dampen any demands to increase our wholesale rates in the short term (i.e. over the next twelve months). Interest rates are unlikely to alter at all this year, which does give borrowers more certainty.

Interest Rates in the United Kingdom
As the UK is in a severe recession one would expect their interest rates to be low. This is correct. Mortgage rates are lower than in this country. It is possible to obtain a honeymoon rate, in the UK, at under 3% for up to two years but penalties apply for early repayment. The way to compare mortgages in the UK is straight forward, as they use the term APR (annual percentage rate). This is similar to the New Zealand’s old “finance rate” and it enables you to compare different loan offerings. The APR must be disclosed in the UK. The average floating APR in the UK is around 4% - which is around 1.75% lower than our floating mortgage rates.

Open Ended Bridging Finance is Available
We currently have bridging and short term finance available. One of the benefits of our product, is that it can be open ended. This covers the situation where you are moving towns, and have bought but not yet sold your existing property. We are happy to lend on these types of propositions. This is different to the banks, as they prefer you to have sold your existing property, before you buy, or at least that you are able to settle both transactions contemporaneously. With us, this is not the case - we are happy to enable you to have another six or twelve months to sell your existing property and this way you may get a better price.

Money to Invest
For those that have recently sold an investment property or a holiday house and have some cash to invest, you may be looking for a home for those funds. Bank deposit rates are low. We operate a deposit taking company. We are currently offering 8.0% for two years and 8.05% for three years. If you are in this position, please do not hesitate to contact us to discuss further, to obtain a copy of our prospectus.

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.