BORROWERS Mortgage Commentary 02 / 2012
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Issue 2012 / 2   2 March 2012

Welcome to the second fortnightly General Finance Mortgage Commentary for 2012.  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 2 March 2012) the money markets were at the following levels:
Official cash rate 2.50% (unchanged)
90 day bill rate 2.75 (up from 2.73)
1 year swap rate 2.87 (up from 2.76)
3 year swap rate 3.32 (up from 3.10)
10 year bond rate 4.11 (up from 3.96)
Kiwi dollar 0.8354 (up from 0.8320)

Auckland Housing Market
The Auckland housing market continues to firm. We believe one of the (undiscussed) reasons it may continue, is that when a Labour Government gets into power again, they will introduce a capital gains tax. The one exemption is likely to be your family home. So one way to purchase an asset that is likely to appreciate and remain tax free is to continue to trade up with your family home. This is what has happened in Australia, after the introduction of its capital gain tax. It seems pointless to introduce a tax like this, when all it will do is make houses more expensive and more difficult for first home owners to enter the market.

January Sales Figures
According to the Real Estate Institute, January was a good month for house sales. There were 4,073 dwellings sold across the country - up by 25% from 3,252 for the same period last year. In fact, this was the best January since 2008. Considering January is usually a quiet month, this result was pleasing. House prices have firmed in the past twelve months, with average increase across the country being 4.44%. The stand-out areas were, Taranaki up 11%, Otago 10% and Canterbury /Westland up 8%. As Auckland is by far the largest area, it tends to be around the average at 4.66%. Waikato and Northland were the only two places that recorded a decline.

Australian Mortgage Rates
One area in which we are beating the Australians is our lower mortgage rate. Our floating rates range from 5.6% to 6.0%. In Australia they range from 6.32% to around 7.00%. As most borrowing is done at floating rates in Australia, there is a lot of competition (unlike this country) between banks and non-banks. New Zealanders have traditionally favoured fixed rates but this has been changing in the past two years. The 2 year fixed rates for residential loans are similar in both countries - our 2 year rates range between 5.79% through to 7.00% and theirs range from 5.95% through to just over 7.00%. This is good news for Kiwi borrowers.

Tax to Pay?
If you have tax to pay and you are finding it difficult to borrow from your bank, we may be able to assist. For some reasons banks are not keen on lending for tax payments. We view this as normal lending and happy to provide first and second mortgages here. Security must be over residential property.

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.