BORROWERS Mortgage Commentary 05 / 2012
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Issue 2012 / 5   13 April 2012

Welcome to the fifth 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 (noon on 13 April 2012) the money markets were at the following levels:
Official cash rate    2.50% (unchanged)
90 day bill rate       2.76 (up from 2.75)
1 year swap rate    2.77 (down from 2.83)
3 year swap rate    3.20 (down from 3.28)
10 year bond rate   4.02 (down from 4.17)
Kiwi dollar         0.8282 (up from 0.8171) 

Good Time for Home Buyers
Interest rates are at lows not seen since the early 1970s.  Rents, particularly in the major cities, are high and are continuing to rise. In many cases, it costs now roughly the same to own a property as it does to rent it.  If your income is relatively secure, this is now the time to consider owning your own property. Mortgage rates are low, but if you are worried about them rising and making it harder to meet your repayments, it is now easy to fix them and protect yourself. Many renters complain about the quality of their accommodation.  By owning, you can steadily improve your property and this may be reflected, over time, in an increase to the capital values.  

Why Interest Rates Must Stay Low
Earlier this week, the Government said it is increasingly unlikely it will meet its fiscal surplus targets by 2014/15. This is fairly obvious. Our growth over the past few quarters has been minuscule - often a quarter or a third of a percent, which are really rounding errors.  We are still in recession and have been since 2007.  Just ask any retailers or small business owners.  We are being kept out of a worse recession, largely because of the efforts of our dairy industry. With the global economic weakness and NZ’s current financial position, interest rates must be kept low, to create employment and stimulate growth. 

Bank Will Not Approve Your Loan?
There are still a number of borrowers who would like to purchase a property, and who may have a reasonable deposit, but to whom the main stream lenders are saying no. The reasons are often due to credit issues or difficulty in substantiating income levels.  A solution is to come to us and we can provide bridging finance for a year or two, to enable the borrowers to tidy up their financial affairs and prior to refinancing on to a main stream lender. This is a good solution, as it enables the borrower to purchase the property they want to now, and to get on with their lives.

LIM Reports
When buying new property we suggest that you obtain as much information as possible about your intended purchase. One useful document is a land information memorandum (LIM) report from your local council. These contain a wealth of information. For example, they may contain references as to whether the property has had any hazardous contaminants or any cleaning and repair orders.  This will assist you to check whether the property has been used as a p-lab. This is an example of the usefulness of LIM reports.

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.