Cairns Lockie Mortgage Commentary 3-12-10
Cairns Lockie Mortgage Commentary
Issue 2010 / 22 3 December 2010
Welcome to the twenty-second (and last) fortnightly Cairns Lockie Mortgage Commentary for 2010. We aim to keep you informed on developments at Cairns Lockie Home Loans and the mortgage market in general. Previous issues of this commentary can be found on our website http://www.emortgage.co.nz/newsletters.htm
The Money Market
This morning (9am on 3 December 2010) the money markets were at the following levels:
rate 3.00% (unchanged)
90 day bill rate 3.18 (up from 3.16)
1 year swap rate 3.42 (down from 3.55)
3 year swap rate 4.22 (down from 4.35)
10 year bond rate 5.74 (up from 5.60)
Kiwi dollar 0.7502 (down from 0.4430)
The Year in Summary from a Finance Company Perspective
For the financial services industry 2010 has been a difficult year, much like 2009. When the Government guarantee for deposit takers came into force in 2008, most of the weaker finance companies had already collapsed. During the year we had the failure of South Canterbury Finance which appeared to be due to, among other things, too much related party lending (which is a no no), excessive growth, management and systems issues. As it was covered under the guarantee the Government has paid out to all those investors. The guarantee has ended for most institutions, including the banks, and we believe that it is no longer needed. To give the investing public greater security and this is required; all non bank deposit taking institutions are now subject to tougher regulatory and reporting requirements. General Finance has registered on the new Financial Service Providers Register, and has been preparing for the new regulatory regime for some time.
2011 Crystal Ball
It is difficult always to try and predict the next twelve months but we believe it may be a slight improvement on the current year. We are clearly still in a recession - unemployment remains high by New Zealand standards but not compared with many other countries. Currently many retailers and small businesses are finding business conditions tough. If immigration improves next year this will add some stimulus to the residential housing markets. Our currency is likely to remain firm over the next twelve months which makes it tough for the exporting sector but easier for those purchasing larger imported consumer items such as flat screen televisions and cars. Each month that passes by, the global financial crisis of 2007/8 recedes into history and its ramifications diminish. We feel that next year will be a little better than this year due to some positive economic growth returning, and one off events such as the election and the rugby world cup.
Regulation in the Financial Services Industry
In 2011 we will see the effect of this year’s regulation of the financial services industry. All involved in the retailing of financial services (including sharebrokers, financial planners, and mortgage and insurance advisors) will all have to become, an authorised financial advisors (AFA), a registered financial advisor (RFA), or belong to a qualifying financial entity (QFE). This last group covers larger organisations such as banks and insurance companies which conduct their own training and monitoring within the regulatory framework. Each advisor must belong to a disputes resolution body. The purpose of all this is to provide more protection to individuals investing their own savings and to help restore some faith in the financial services sector. 2011 will be a busy year for those wanting to become or to remain as financial advisors. To become authorised, financial advisors must attend lectures, complete assignments and sit exams. The directors are working towards becoming authorised financial advisors (AFAs), which we hope to have completed early next year.
Just a reminder - we do have short term or bridging finance available. It is for people looking for mortgage finance for the shorter term - often from 6 to18 months. Reasons are varied but often including requiring time to sort out finances before going to a mainstream lender, or bridging the purchase of a new house until the other one sells. On the other side, our finance company is taking deposits. Our prime rate for investors is 9.25% for 3 years with an option of the interest being paid either quarterly or monthly. We are one of the few finance companies to offer this monthly option. As many people are now paying their bills on a monthly cycle then this is attractive way to receive your interest. A copy of our registered prospectus and investment statement can be obtained from our office or our website at www.general.co.nz.
As this is our last newsletter for the year, we wish everyone a Merry Christmas and a happy New Year. Our next newsletter will be on 11 February 2011. We appreciated your support for 2010 and look forward to your continued support in 2011.