BORROWERS Mortgage Commentary 12 / 2011
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Issue 2011 / 12   15 July 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 (10 am on 1 July 2011) the money markets were at the following levels:
Official cash rate         2.50% (unchanged)
90 day bill rate            2.66 (up from 2.65)
1 year swap rate          2.97 (up from 2.90)
3 year swap rate          3.84 (up from 3.75)
10 year bond rate        4.98 (down from 5.07)
Kiwi dollar      0.8425 (up from 0.8286) 

Assisting the Next Generation into a Property
Last fortnight we discussed how we can assist the next generation into their first home. We talked about whether funds should be gifted or on-lent. Another alternative worth considering is proportional ownership. For example, a son or daughter may decide they can afford three quarters of a house and their parents are prepared to own the other quarter. The advantage to the child is that they get into a house; the advantage to the parents is that they now own a quarter of another property. The disadvantage is that they are now responsible for a quarter of the outgoings, plus they will be responsible for the whole mortgage should the son or daughter ever default.  In this situation, it is essential to have a well worded partnership agreement noting each party’s obligations.  The parents should also receive some rental for their share but this is often discounted if the child is totally responsible for all rates, maintenance and improvements. The agreement should include a buy out clause, as in most cases the child normally wishes to assume a 100% ownership sometime in the future. Proportional ownership with one’s parents can be a good way to start out on the property ladder, but we believe each party’s rights and obligations must be clearly stated at the commencement of the arrangement.  

Putting Your House into a Trust
If you are buying a new house or putting your existing one into a trust, and mortgage finance is required, your lender will be asking for more information.  First of all you need to create the trust.  We suggest you discuss this with your solicitor and create one that exactly meets your individual requirements. Your lender will require a copy of your trust deed.  Your insurance company and local council will have to be advised of the new ownership as well.  The issue of a trust bank account also needs to be discussed with your trust advisor.  Putting your house into a trust is not a difficult process, but it does involve legal costs, extra paper work, working with your independent trustee and seeking proper advice from professionals in the field. 

Buying a Rental Property
Rental property is currently in strong demand in Auckland. We are receiving inquires from a number of clients looking to purchase rental properties. We notice that investors are paying more attention to whether their proposed property investments are close to public transport routes. In Auckland, in particular, there is a big push to improve the public rail system and bus services are also improving. As petrol continues to increase in price, and if warrant-of-fitness requirements become stricter, some tenants may decide to forgo their motor vehicles. If this occurs and public transport continues to improve, rental accommodation near public transport should command a slightly higher rental and be more popular with potential tenants.  

We Have Funds to Lend
Currently, our associated company, General Finance Limited has funds to lend. Over the past few months we have seen a number of investors returning to us.  This is positive. As a result, we have additional funds to lend. Funds are available for short term or bridging purposes. We will still consider lo-doc type transactions or those with limited financial information. We are seeing a number of clients who require extra time to sort out their finances before they are able to approach a more permanent long term lender. We welcome your enquiries.

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.