BORROWERS Mortgage Commentary 14 / 2012
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Issue 2012 / 14   17 August 2012

Welcome to the fourteenth 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 17 August 2013) the money markets were at the following levels:
Official cash rate    2.50% (unchanged)
90 day bill rate       2.65 (up from 2.64)
1 year swap rate    2.65 (down from 2.69)
3 year swap rate    2.97 (up from 2.96)
10 year bond rate   3.84 (up from 3.42)
Kiwi dollar         0.8109 (up from 0.8090)

Auckland Rates
Most property owners in the Auckland area will by now have received their rates notices. Ratepayers in areas, such as central Auckland and the North Shore, will notice two figures on their bills: the new rate sum, and if it exceeds 10% of the previous rate amount, then a capped amount. You pay the capped amount. Other parts of Auckland will notice smaller increases between 1% and 4%, and in a few areas, an actual drop in rates. In some circumstances, if there has been a change to your property (e.g. it has been subdivided, a garage or another room added) then the capped amount will not apply.  Some ratepayers affected here, have seen increases in excess of 20%. Rates in Auckland are becoming increasingly expensive. Given a shortage of rental property in the city, landlords should be able to pass their rate increases on to their tenants. In reality we are all paying more to the Auckland City Council.

Mortgage Rates across the Tasman
So far this year, Australian wholesale rates have dropped from 4.75% to 3.50%, compared with ours that have remained constant at 2.50%. As a result, mortgage rates have dropped across the Tasman, with numerous specials being offered. The same is happening in this country, with specials being offered in the one to two year fixed periods as well as some discounting.  Our benchmark floating rate is 5.74% but specials can be found in the low 5s. Again the benchmark floating rate in Australia is 6.80%, with basic no frills rates in the low 6s. There are even a few specials being offered at just under 6%. Right now mortgage rates are better in New Zealand than across the Tasman

New Agreement for Sale and Purchase
Some purchasers and vendors may have noticed there is an updated agreement for sale and purchase - the ninth edition. Some of the changes are specific to unit title properties, as in 2010 the Act was changed regarding these types of properties.  Some of the changes assist the vendor and some the purchaser. Vendors now have to warrant that the chattels are in reasonable working order. The settlement and possession dates are now the same. Nominees are recognised, as a number of properties are bought through nominees. Where GST is involved (normally with commercial property transactions) this section has been amended. We certainly recommend that if you are buying or selling a property, you spend some time becoming familiar with the updated sale and purchase agreement. This is a key document.

Loc Doc
We are one of the few lenders still offering low doc loans. This is a useful product, but is only suitable for borrowers in certain circumstances, such as the self employed. People are continuing to ask for it. Our low doc is for bridging and short term purposes for up to two years.  Interest-only is fine. At the end of two years, there must be an event such as the sale of the asset or the planned refinance to another lender. The good news is that we look at these propositions.

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.