Investor Newsdletter #3 - September 2009

Welcome to our September 2009 General Finance quarterly newsletter. We appreciate your support. The purpose of this newsletter is to keep you informed about the company and various financial matters that may interest you.

Our Current Lending

Over the past six months we have seen an increase in the number of mortgage applications and the quality is continuing to improve. This is due to the improvement in lending standards that is operating across the financial markets in general. There are now fewer sources of secondary finance available, which is beneficial for us. All our new lending is secured by way of first mortgages over residential properties with a maximum loan value not exceeding 70%. We do offer second mortgages but due to the number of applications, we are currently only writing first mortgages. As a result, as at 31 August 2009, 79% of our mortgage portfolio was in first mortgages, well up on 64% as at 31 March 2009. Our aim is to continue to concentrate on the first mortgage residential sector.  

New Prudential Requirements for Finance Companies

You will have seen comment in the press about new regulations for finance companies. One change that has been foreshadowed by the Reserve Bank, and which we thoroughly support, is that finance companies must have a certain level of capital based on their type of loans and how much they are lending against these assets.   Assets are ranked according to a scale - the more risky they are, the more capital the shareholders must provide. For example residential mortgages with a loan to value ratio of less than 70% will require the least capital, car loans will require more, and commercial property developments and the holding of shares in other companies more still. This makes a lot of sense, as it should be the shareholders who take most of the risk, rather than the investors.  With our concentration on residential first mortgage lending we are well placed for the new regulations.  These new laws are expected to be implemented next year and we will keep you informed with developments in this area.

Positive Moves in the Housing Market

According to QV Valuations, house prices are climbing back towards last year’s levels, after four months of increasing sales values. The national average sale price for August (New Zealand wide) was $385,426, only 2.8% below the same period last year. The main reasons for this recovery are the shortage of stock and the demand for properties which is reasonably good. Again QV Valuations note that this is a surge rather than the start of a boom. The Auckland market is recovering as well - the average sale price for August was $564,319, only 1.8% off the corresponding figure from August last year. This is good news for us as our security is based on residential property.

Interest Rates

Interest rates have been edging up slowly this year. Just to remind our investors, if you are looking for a rate above 8%, our three year rate is 8.25%. If you deposit more than $10,000 with us, you can have your interest paid monthly. This is a great advantage for those wanting a regular monthly income.

Next Interest Payment 

Our next quarterly interest payment will be made on the evening of Wednesday 30 September 2009. Direct credits will go in that evening, with cheques (if applicable) and paperwork being forwarded during the week.

If you have any questions about your investment please do not hesitate to contact me on 09 526 7801 or by email to wcairns@general.co.nz  Our website is a www.general.co.nz.      

If you want to invest more funds, you can obtain an investment statement and application form from our securities registrar.  Their number is 0800 500 602.

Your continued support is appreciated.