Issue 2017 / 7 5 May 2017
Welcome to the seventh fortnightly General Finance Mortgage Commentary for 2017. 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 5 May 2017) the money markets were at the following levels:
Official cash rate 1.75% (unchanged)
90 day bill rate 1.95 (unchanged)
1 year swap rate 2.07 (down from 2.08)
3 year swap rate 2.54 (up from 2.53)
10 year bond rate 3.02 (up from 2.96)
NZ/US dollar 0.6870 (down from 0.7000)
Inflation is Creeping Up
For the past seven to eight years inflation has, either been going down, or sitting at low levels under 2%. In this last quarter, inflation is now at annualised rate of 2.2%, with the outlook that it may go up more. While this does not seem significant, it is when inflation starts to rise that all sort of negative things start to occur - such as mortgage rates starting to rise, consumer goods inflation and pressure on wages and salaries. While salaries and wages will increase, these will never fully compensate workers for the overall increase in the costs of goods and services. The worse causes of inflation are the local councils, which are continuing increasing rates, and the Government, which seems to have a cost plus mentality for all their services.
KiwiSaver is Performing Well
Since its inception, KiwiSaver has performed reasonably well. Over the past five years, balanced funds (cash, bonds and shares) have returned in the range of 7 - 9% per annum. KiwiSaver has been going now for ten years, and some contributors have healthy balances. It has now reached the stage that KiwiSaver is seen part of an individual’s overall asset position. Most New Zealanders traditionally own a house, with a mortgage, and various chattels, but have few investment assets. Now they have KiwiSaver, which in itself is well diversified. Over time it is becoming an increasingly important asset for most New Zealanders.
Losing Fertile Land
As Auckland City continues to grow rapidly, there is a dilemma that the town planners have to consider. The area around Pukekohe has near perfectly fertile volcanic soils, plus a climate which makes it ideal for market gardening. We need more land for housing, but it will be a real shame (and there are economic consequences) if we turn this highly productive land into housing developments. As a country we need to protect our most valuable agricultural lands.
Poor Transport is Increasing Prices
One of the components in the cost of any goods that we purchase, is the cost of transporting them to market. It is pleasing that the Government is proposing to put more money into infrastructure development. As it takes longer to deliver goods in our major cities, transport operators will have to purchase more trucks and offer their staff overtime. Who pays for this? It is the consumer. More roads, efficient ports (most are council owned and operated) and railways (Government owner), all will help to lower our internal transportation costs.
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.