Indexgroup Newsletter

Hi [salutation],

With Christmas looming and economic forcasts for 2006 beginning to look a little nasty, its probably not a bad time to have one last think about things before heading into the festive season. On that note, here goes...

1. New Franchisees

This month I would like to welcome Alan MacDougall to the team- Alan has just completed our Accreditation Program and will be based in Raglan, servicing Hamilton and the Waikato with Julie Ambury, who is over the way in Te Awamutu. Also confirmed for a January start is Kate Mooar and Lisa Daly, both of whom bring a wealth of banking experience to us from their previous roles at BNZ (thanks fellas) and Westpac.
To date all of our franchisees (7) have done a great job in getting themselves established in their local areas, ensuring that in a pretty short space of time we have managed to create a real presence in the market.

2. Sponsorship News

The big news this month is our cricket sponsorship on the Radio Network. The deal covers 1ZB, Radio Sport, 91ZM, Classic Hits and Viva, and means that whenever you hear anything cricket related, it will be bought to you by Adam Parore Mortgages. We also grabbed the opportunity to sponsor the Top of the Hour Sports News on Radio Sport, and have a pretty chunky advertising program lined up for 2006. To date this, coupled with our existing Friday morning slot with (mad) Martin Devlin on Radio Live, means that the phones have been running hot, and all the troops have had plenty to do pre christmas. Thanks to Paul and Sandie for making it all happen- we eagerly await the delivery of our company jingle in the new year...

3. RBNZ- whats up?

Oh dear. It had all been going so well for Alan Bollard leading into yesterdays OCR announcement. Following a month or so of constantly bagging our on- going desire to spend as much money as we could, I was beggining to feel that the scare mongering might even have worked. Sentiment had changed. It would have stayed changed too if he had just raised the OCR another .25% yesterday and left it at that. Unfortunately when you put a microphone in front of someone they feel compelled to talk, and keep talking. (personal experience on that one) I refer of course to the bit at the end when he casually mentioned that that was probably going to be it for a while in terms of interest rate rises. Bad Mistake. As a consequence what will we do? We won't live in fear of another rate rise in January thats what. And we probably will spend a little more now on Christmas presents. I seem to remember a similar approach from the RBNZ about this time last year. One wonders if they will ever learn?

4. Interest Rate View

Chrystal Ball time. Where to from here? Floating Rates for a start- Expect the banks to pump them up from 9.25% to 9.50% within the next week or so. Hopefully Bollard has seen some significant signs of slowing in the hosuing market (I haven't) and as a result of that felt comfortable to predict a possible end to this cycle of interest rate rises. I suspect that is not the case- if it were he would have stuck with his pledge last time around to continue to raise rates only until he saw a visible sign of easing in spending. The risk from here is that consumer spending, fuelled by Christmas, continues to bomb along and he needs to go again come January. Chances of this? I think about 40%, although they have increased as a result of the comment yesterday alluded to above. If he had just sat down after announcing yesterdays rise I would have said we were looking at about a 25% chance of another rise in January.

Fixed rates have moved sharply in the past month and the banks will use this rise as an excuse to push them out further, as they did last time. (sneaky buggers) This is despite the fact that the swop rate, which is the mechanism banks use to fund fixed rate lending, is likely to come back slightly, as it did yesterday, in response to Bollards announcement. 3 month view? Fixed rates generally to go out by at least .25% maybe a smidge more.

5. What should I do?

If I was a borrower, and coincidentally I am, I would be looking to get 2- 3 years fixed locked down asap. If that means breaking an existing rate (less than 4 months to run) then I would take a higher rate on the chin on the basis that when you come to refix in 4 months time you are likely to be another .25% (at least) under water for the duration of the term- 2 or 3 years! Those with settlements falling in January or February should try to lock a fixed rate in, even if it means paying a fee. Those with settlements falling further out (me) dont have many options unfortunately...

Merry Christmas!