BORROWERS Mortgage Commentary 07 / 2011
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Issue 2011 / 7   6 May 2011

Welcome to the first fortnightly General Finance Mortgage Commentary for 2011.  We aim to keep you informed on developments at General Finance Home Loans and the mortgage market in general.  Previous issues of this commentary can be found on our website

The Money Market
This morning (9am on 6 May 2011) the money markets were at the following levels:
Official cash rate    2.50% (unchanged)
90 day bill rate       2.65 (unchanged)
1 year swap rate    2.85 (unchanged)
3 year swap rate    3.86 (down from 3.95)
10 year bond rate   5.20 (down from 5.74)
Kiwi dollar         0.7840 (down from 0.7968) 

OCR is Unchanged
Every major financial institution predicted there would be no change in the Official Cash Rate last Thursday. They were correct.  Our OCR remains at 2.5%, with the Governor of the Reserve Bank making the following comments, "The economy remains very uncertain following February’s earthquake in Christchurch".  We are currently experiencing an inflation boost due to GST rate rises late last year, and fuel and food price increases.  The OCR is expected to remain at these low levels for up to the next 12 months.  This is good news for those with mortgages.

House Prices
According to the Real Estate Institute of New Zealand, the average asking price for dwellings is at the highest level since before the global financial crisis (2008). New Zealand wide, the average asking price was $429,249. This is assisted by Auckland, where the average asking price is around $550,000.  Agents in Auckland are reporting more activity and the casual observer can see this by driving around, with considerably more "For Sale" signs with "sold" on them. The average time it takes to sell a property in Auckland is down to 35 days, from over 40 days a year ago. 

Leaky Buildings
Over the past 15-20 years a number of individuals have purchased a dwelling which they thought was fine, only to learn, 1 or 5 to 10 years later, they have bought a leaky home. This has caused all sorts of problems - both financially and emotionally. There are some ways to protect you from this issue.  One way is, to obtain specialist weather tightness report when you are buying. Various specialists operate in this area and provide their services at relatively modest costs. If you are using a valuer, as your lender may have requested a valuation, talk to your valuer about weather tightness issues. Although they are not experts in the area, they are working for you, and because they are in the market day after day, they do hear and learn things. If in doubt we advise potential buyers to obtain a weather tightness report.

Gift Duty Changes
Most who have family trusts are aware that an individual can gift up to $27,000 per year, or a couple, up to $54,000 before gift duty is payable. Those transferring their house to a trust have faced a gifting programme, with accompanying legal bills and compliance obligations, for 5 to 20 years.  The Government has introduced a bill to abolish gift duty altogether. When this new law comes into force (expected date 1 October 2011) you will be able to transfer the full value of your house to a trust in a single transaction. The reason for this change, is that the Government spends far more on monitoring this than it receives in gift duty – and so they are planning to abolish it.

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.