BORROWERS Mortgage Commentary 21 / 2011
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Issue 2011 / 21   18 November 2011

Welcome to the twenty-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. 

The Money Market
 This morning (9 am on 18 November 2011) the money markets were at the following levels:
Official cash rate    2.50% (unchanged)
90 day bill rate       2.64 (down from 2.73%)
1 year swap rate    2.60 (down from 2.90)
3 year swap rate    2.95 (down from 3.36)
10 year bond rate   3.88 (down from 4.35)
Kiwi dollar         0.7647 (up from 0.7948)

House Prices Edge Higher
Nationally house prices are up by 1.2% to $399,821 to October 2011, from the same period last year, according to Quotable Value (QV). The two most active areas are the Auckland region (up 2.7%) and Christchurch (up 3.4%). Auckland is just a snip, 0.1%, off its high of four years ago. Auckland agents are noticing that selling times are shortening and there is increasing competition for sought after properties. This is being driven by a limited supply - it just extremely difficult for developers to obtain finance to build more dwellings. This is unlikely to change in the near future so house prices in the Auckland area are likely to increase further.

Harder to Obtain Finance
The rules for obtaining mortgage finance have changed considerably since the onset of the global financial crisis in 2008. Prior to this, if you had a job and a suitable property you were almost guaranteed a home loan. It is still reasonably straight forward for a couple to obtain a mortgage if both are working, with regular incomes and they have a 5-10% deposit. That is were it now stops. Self employed people now have to provide a lot more financial paperwork. The same goes for those with variable incomes, such as commission agents. Larger deposits are being required.  Be prepared to wait longer for approvals, despite some bank advertising to the contrary. Lenders have more due diligence to do, such as checking on the condition of the property and identifying the borrowers. The rules have changed.

Having Difficulty Paying Your Mortgage?
As we are in a recession, businesses are finding it harder to trade and unemployment is at a higher level than a few years ago. As a result, some people are finding it harder to meet their mortgage repayments. If you find yourself in this situation, it is imperative that you let your lender know straight away. Be upfront and fully explain your situation to them. This will certainly not be the first case they have dealt with.  There may be some things that a lender is able to do immediately such as interest holidays or switching your loan to interest only.  Any arrangements that you make - stick to them. If things get worse, front foot it.  It is much better that you call your lender first rather than the other way around. 

Investing for a Higher Rate
Market commentators are saying that low interest rates are likely to be here for a while yet. This is good news for those with mortgages but not so good for those with funds to invest. What the banks are offering investors, at 3 - 4%, are at record lows. There is an alternative - our finance company, General Finance Limited. Our benchmark rate is 8.25% for 3 years. All lending is restricted to the residential sector with the vast majority being first mortgages. If you are interesting in investing just ask for a Prospectus.

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.