BORROWERS Mortgage Commentary 08 / 2012
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Issue 2012 / 8   25 May 2012

Welcome to the eighth 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 (10am on 25 May 2012) the money markets were at the following levels:
Official cash rate    2.50% (unchanged)
90 day bill rate       2.52 (down from 2.62)
1 year swap rate    2.30 (down from 2.48)
3 year swap rate    2.55 (down from 2.73)
10 year bond rate   3.35 (down from 3.57)
Kiwi dollar         0.7509 (down from 0.7848) 

Our Budget
The budget has had little effect on property owners and investors. The only group that is affected, and it is small, is those letting their baches out on a part time basis. Instead of being able to claim up to 90% of the running costs, these will now be apportioned based on rental time used.  Capital gains tax was not mentioned.  The budget has been described as neutral and will have little, if any, impact on interest rates. A test for the budget, is whether the financial markets react.   They didn’t.  It is business as usual.  

Interest Rates
Over the past six weeks our financial markets have been particularly volatile. Most people are aware of the falls in the world share markets due to the deepening European crisis but other markets have reacted as well. Our currency, against the USA, has dropped from around 82 cents to around 75 cents today. Similarly interest rates have dropped as well. Ten year government stock rates have moved from just over 4.0% to around 3.4%. This has seen some further competition in the shorter end of the prime mortgage market. The markets are telling us that economic conditions are going to be quiet and so lower interest rates will be with us for longer. The budget is unlikely to affect this outlook at all. 

Auckland Housing Shortage
The greater Auckland City Council has come under some flak over the proposed inner city rail loop. We believe that Kiwi Rail should be promoting a fast speed train between Auckland and Hamilton. This would allow people who have to work in Auckland, an opportunity to live in the Waikato. The rationale is that Hamilton has lower house prices than Auckland, has available land to build on and it could be used as an overflow for Auckland, helping to ease the current rental and housing shortages. People commute these distances in other countries such as the UK.  We believe this is an idea worth pursuing.  

Low Doc Still Available
We are continuing to be asked whether we do “Low Doc” loans. The answer is yes.  We are happy to do low doc loans up to an LVR of 70% for a maximum term of two years. We are happy with a wide range of loan purposes including purchasing a business, paying tax, and cleansing loans. Just give us a call.

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.