BORROWERS Mortgage Commentary 16 / 2012
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Issue 2012 / 16   14 September 2012

Welcome to the sixteenth 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 14 September 2012) the money markets were at the
following levels:
Official cash rate      2.50% (unchanged)
90 day bill rate        2.65 (unchanged)
1 year swap rate        2.58 (down from 2.65)
3 year swap rate        2.82 (down from 2.87)
10 year bond rate       3.60 (up from 3.44)
Kiwi dollar     0.8311 (up from 0.8020)

Issues with Vendor Finance
Occasionally we see loan propositions where vendor finance (sometimes
10% to 20% of the value of the property) is being provided. As a rule,
vendors do not like this type of finance and it is not a substitute for
a genuine upfront cash deposit. This type of funding may be common in
other jurisdictions, such as the USA, but it is not common here. Often
it is used as an incentive to sell a property that is either unique or
is in an unusual location. Sometimes it is used to extract a higher
price. This does not sit well with mortgage lenders.  A genuine property
does not require vendor finance to sell it.

Your Family Trust
It is well known that there are a large number of family trusts in
existence in this country. Many have been established in the past
fifteen years. The question people should be asking themselves is do
they really need their family trust.  If the answer is no, then since
last year it has become easier to unwind them. This is due to the
gifting requirements changing.  You can now gift your assets to a family
trust or gift them back in one step, rather than at $27,000 per year for
a single person or $54,000 for a couple. In some cases, it took years to
complete all your gifting. Similarly, if you wanted to unwind a trust,
it could take a long period as well.  This has changed.  It can all be
done straight away. If you are unsure whether you need your trust, now
is the time to talk with your legal advisor.

KiwiSaver and Buying a House
KiwiSaver is now five years old. Those who have been in the scheme for
the full term will have accumulated a nice nest egg, depending on their
own and their employer's contributions. Those who are now over
sixty-five years old, will probably withdrawal their funds, but they do
not have to. Another group that can benefit, are those wanting to
purchase their first home. A unique feature of KiwiSaver is that you can
withdrawal your proceeds, if you are purchasing your first home. If
there are two of you and you both have KiwiSaver accounts, all the
better. This is a good way to assist people into their own homes.

Unwelcome Tax Bill
We advance funds to clients for a variety of reasons.  One area that
clients come to us (where other lenders, particularly the banks, are not
keen) is for the funding of current and past tax commitments. For us
this is good lending. Our normal terms and conditions apply.

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.