Issue 2013 / 3 15 March 2013

Welcome to the third fortnightly General Finance Mortgage Commentary for 2013.  We aim to keep you informed on developments at General Finance Home Loans and the mortgage market in general. 

The Money Market
This morning (9 am on 15 March 2013) the money markets were at the following levels: 
Official cash rate    2.50% (unchanged)
90 day bill rate       2.66 (down from 2.67)
1 year swap rate    2.71 (down from 2.78)
3 year swap rate    3.13 (down from 3.16)
10 year bond rate   3.83 (up from 3.74)
NZ/US dollar      0.8207 (down from 0.8270)

Official Cash Rate
As expected, the Governor of the Reserve Bank left the official cash rate unchanged at 2.5%.  What are more interesting, are the comments he made with his statement. Firstly he said that rates are likely to remain unchanged for the rest of the year. This makes sense as unemployment is showing no signs of easing, and we have drought conditions in many parts of the country which will negatively affect farm incomes. Overall economic growth will remain subdued. This is certainly not the time to be raising interest rates. The immediate result in the financial markets was a slight easing of long term interest rates and the exchange rate. Those with mortgages will feel relieved, as these current low rates should remain in place for the rest of the year. 

Housing Market
According to the Real Estate Institute of New Zealand, last month was the most active February for the past six years. During the month 6,032 dwellings were sold with a New Zealand wide median price of $382,000.  This is close to the all time high of $389,000 reached in December of last year. What is interesting is the trend. The Auckland and Christchurch markets are the most active, with houses selling, on average, in 33 days. The momentum for the demand for property is spreading. For example, agents in Northland have commented that their enquires have increased.  This is expected to continue for the rest of 2013.

Housing Solutions
If you look at any old photo (more than fifty years old) of an inner city suburb, boarding houses feature. They were popular, particularly with younger single people, as they offered some real advantages - they were cheaper than flats, easier to obtain, and they were centrally located. Recent legislative changes to the Residential Tenancies Act have made this form of investment less desirable, from an owner’s perspective. May be we should change this and encourage this form of accommodation as a lower price alternative. It is worth considering.

Short Term Finance
General Finance Limited continues to offer short term loans. The purposes of such loans are several - normal type bridging transactions, to pay tax arrears and we are seeing an increasing number borrowing to purchase businesses or franchise types of operation. All our loans are on an interest-only basis but we will look at capitalising interest in certain circumstances.

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.