Issue 2012 / 20   9 November 2012 

Welcome to the twentieth 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 (3.30 pm on 8 November 2012) the money markets were at the following levels:
Official cash rate    2.50% (unchanged)
90 day bill rate       2.63 (down from 2.65)
1 year swap rate    2.56 (down from 2.57)
3 year swap rate    2.76 (down from 2.82)
10 year bond rate   3.50 (down from 3.60)
Kiwi dollar         0.8182 (down from 0.8190)

Interest Rates Across the Tasman
On Tuesday of this week, the Governor of the Reserve Bank of Australia decided to keep their overnight cash rate unchanged at 3.25% (ours is 2.5%). Most thought he would cut, but he expressed concern that inflation was starting to surface again. We have a new Governor of our Reserve Bank. His next announcement will be made in December. We believe, due to the high dollar, a still sluggish economy and virtually zero inflation, that he should cut our interest rates. Based on the past he probably will not - we would like to be proved wrong in this instance.

Renting or Buying?
It is interesting to see, over the past few days in the NZ Herald a debate on whether it is better to rent than buy (a residential property).  History has shown that it has been better to buy than rent. For most people this continues to be true, as a house is not just a financial investment but a home as well. For some, if you are using all your capital to establish a business or if you are moving around a lot with your work, it may be better to rent. In the end it is a personal decision. We want to keep it this way, as one of the reasons many people chose to come to this country was to buy a piece of dirt to call their own.

KiwiSaver
The amount of money being withdrawn from KiwiSaver by first time home buyers to purchase a home has more than quadrupled this year. The Financial Markets Authority noted that $57.2 million was withdrawn in the year to 31 March 2012, well up from $12.3 million the previous year. This is logical as KiwiSaver balances are increasing the longer members are in their various schemes.  If a couple are purchasing a home and both are in KiwiSaver they can access their contributions. We believe this will only increase as greater numbers join, balances increase and more see this as one of the great advantages of this superannuation product. The only caveat is that you have to be in the scheme for a minimum of three years before you can apply to withdraw your funds to assist with the purchase of your first home.

Building Industry Slowly Recovering
The tide appears to be turning in the construction sector. Residential building consents tipped $5.8 billion for the year ending September. This was up from $4.8 billion in the previous year. This is still down on the $7.7 billion recorded in 2007. This is largely on the back of the reconstruction of Christchurch and the growth occurring in the Auckland region. Things are expected to continue to improve next year which is good as the construction sector is a large employer of people.

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.