BORROWERS Mortgage Commentary 17 / 2012
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Issue 2012 / 17   28 September 2012

Welcome to the seventeenth fortnightly General Finance Mortgage Commentary for 2012.  We aim to keep you informed on developments at General Finance Home Loans and the mortgage market ingeneral. 

The Money Market
This morning (9 am on 1 October 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    2.57 (down from 2.58)
3 year swap rate    2.81 (down from 2.82)
10 year bond rate   3.45 (down from 3.60)
Kiwi dollar         0.8288 (down from 0.8311) 

Bridging Finance
One of the core mortgage services we provide is bridging finance to assist people with short term funding proposals. It works as follow: a person wishing to purchase a new dwelling but has not sold their existing one. We will provide a first mortgage on the property being purchased and a collateral second on the existing property. In this way, by leaving your original first mortgage (probably) with your bank, we keep your total interest costs lower. Once you sell your existing property, you can most probably switch your existing mortgage over to the new property and pay our bridging loan back. Due to the difficulty in locating good properties in Auckland, and given how easily it is currently to sell, we think more people will opt for using bridging finance.

House Prices in Auckland
Last week the NZ Herald newspaper ran each day, a series of articles about why Auckland has such high house prices. Some reasons are emerging as to why this is. Firstly council costs are too high. Why do they charge so much on relatively simple home extensions? Why is it so expensive to build another dwelling on the back of your section, when all the services such as roading, sewerage etc are already there? Medium density is a must. Sydney is a city that has experienced rapid growth like Auckland and now builds relatively attractive medium density dwellings – for example six apartments up to three storeys high on a single site.  A rapid rail from Hamilton may allow some people to live there where houses are cheaper. We have to find some solution soon, other cities have, otherwise Aucklandwill become increasingly more unaffordable.

Alternative Ways to Buy a Property
In Auckland, residential properties are expensive and are increasingly becoming out of reach for single people. A couple has the luxury of two incomes, two lots of savings, cheaper joint living expenses and may have two lots of KiwiSaver to draw on. One way a single person can obtain some of these benefits is to form a property owning partnership with say a friend and then purchase a property together to either live in or let out. The important aspect of any partnership is to have a partnership agreement covering what are each others rights and obligations are and how you will eventually sell the property. A partnership does not necessarily need to be equal - someone can have one third and the other two thirds, for example. This is an alternative way to get on the property ladder.

Our Deposit Rates
General Finance not only lends money but we are also a deposit taker and receive money from the public. Our investments are for the medium term.  Our two year rate is 8.00% and our three year rate is 8.05%.  It is good to see our flows of money in increasing.  You are welcome to call us for a prospectus.

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.