General Finance Mortgage Commentary

Issue 2013 / 16 13 September 2013

Welcome to the sixteenth 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 (9am on 13 September 2013) the money markets were at the
following levels:
Official cash rate 2.50% (unchanged)
90 day bill rate 2.65 (down from 2.70)
1 year swap rate 2.96 (up from 2.90)
3 year swap rate 3.97 (up from 3.82)
10 year bond rate 4.77 (up from 4.51)
NZ/US dollar 0.8124 (up from 0.7833)

Inflation rates
Recently our official inflation rate came in below 1% at 0.9%. This isgood but it hard to reconcile when electricity, rates and insuranceskeep going up. This figure does compare well with other jurisdictions inthe OECD, such as Australia at 2.5%, the UK at a high 2.9%, the Eurozoneat 1.6% and the USA at 1.8%. All indications, from our Reserve Bank, arethat inflation is likely to remain low in this country for the short tomedium term. This is good news for those with mortgages.

Baches May Become Popular
Over the past two years a large number of Aucklanders have receivedreasonably good capital gains on their properties. As a result they feelwealthier. This may lead to an increasing number of people looking tobuy baches, in the holiday places, relatively close to Auckland, such asNorthland and the Coromandel. The prices of baches have not risen inmost holiday areas since the global financial crisis. And in many caseshave fallen. This is particularly true of sections. We believe we arelikely to see more interest in this sector as summer approaches.

LIM reports
We believe that when you are purchasing a dwelling, you should obtain aLIM report. There is a cost to this, but it can provide you withconsiderable information about the property you are buying. Forexample, if the property is a cross lease and building extensions haveoccurred, it should show the council consents for these and whetheranyone has objected. Of more immediate concern, it may containinformation on any hazardous chemicals or clean up orders, which wouldindicate that the property once housed a P Lab.

Deposit Rates
The funds that General Finance lends on its mortgages are sourced fromthe public. Our depositors are investing with us for a variety ofreasons: diversification, higher rates than are available from thebanks, and approval of our focus as a short term residential lender. Ifyou have funds to invest, or you know people who have, we are more thanhappy to discuss their investment options with them. Our flagship rateis 6.25% for two years.

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.