BORROWERS Mortgage Commentary 06 / 2012
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Issue 2012 / 6   27 April 2012

Welcome to the sixth 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 (9am on 27 April 2012) the money markets were at the following levels:
Official cash rate    2.50% (unchanged)
90 day bill rate       2.70 (down from 2.76)
1 year swap rate    2.65 (down from 2.77)
3 year swap rate    2.95 (down from 3.20)
10 year bond rate   3.84 (down from 4.02)
Kiwi dollar         0.8160 (down from 0.8282)

Yesterday the Reserve Bank reviewed the OCR and left it unchanged at 2.5%. The Governor’s comments were interesting. He said that inflation was not a threat (which is positive), and that the economy is recovering slowly. He is worried about the high dollar, particularly in light of falling commodity prices. This is a concern, as it makes it very hard on our income producing exporting sector. The good news for those with mortgages is that we will have stable rates for the rest of this year and early next year as well.

Credit Reports
Credit reports are becoming an increasingly important tool in determining whether a loan will be approved or declined. These reports are starting to show more credit information about a borrower. Credit scoring, which is where the credit provider works out the likely future performance of a particular borrower, is becoming increasingly important here.  Credit scoring is well advanced overseas. All potential borrowers should now realise that their credit report is becoming a key document for lenders. It is important to keep it clean by repaying all your loans in a timely manner. If you have had any past issues, then it is important to tell your potential lender, as they will find out anyway.  You may have sound reasons, such as sickness or divorce, to explain a particular issue.

Individuals who have been in this scheme for the past three or four years are starting to see their balances increasing. Most have not suffered any losses in their scheme, as it really only started after the global financial crisis in 2007. This is positive. For first home buyers the scheme is great, as they can withdrawal funds to assist with the purchase of a property. We are seeing this happening and it will become increasingly common in the future. This is good, as it both assists first home buyers into the market, and adds depth to the housing market as more buyers appear.

Low Doc Loans
We are often asked about low doc loans. These loans were particularly popular before the global financial crisis. We are still doing them, but they are limited to periods of up to two years. Often this is enough time for a borrower to reorganise their finances, get acceptable accounts prepared, sell a property and then be in a position to go to a mainstream lender. This is a useful mortgage product in the current market. We welcome your enquires.

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.