BORROWERS Mortgage Commentary 01 / 2013
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Issue 2013 / 1 15 February 2013

Welcome to the first fortnightly General Finance Mortgage Commentary for 2013. 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 15 February 2013) the money markets were at the following levels:
Official cash rate 2.50% (unchanged)
90 day bill rate 2.67 (up from 2.65)
1 year swap rate 2.80 (up from 2.62)
3 year swap rate 3.18 (up from 2.80)
10 year bond rate 3.86 (up from 3.56)
Kiwi dollar 0.8488 (up from 0.8314)

Short Term Finance
We currently have funding available for short term and bridging loans. This includes low doc and asset lending. The purpose of this funding can be fairly wide, refinancing of short term debts, purchase of boats, and carrying out subdivisions, to name a few. One of our more popular reasons, is to assist people bring their tax payments and arrears up to date. Our criteria are fairly wide, but we do require residential security. We welcome your enquiries.

Capital Gains Tax
Numerous groups are calling for a capital gains tax to be introduced. They mistakenly believe that this will slow down the property market and make housing more affordable. Over the past 3-4 years property prices have really only risen in Auckland, which is growing rapidly and in Christchurch, which is a special situation. Gains in other cities and provincial towns have been more modest. If we look across the Tasman, where capital gain taxes were introduced in the mid 1980s, house prices have continued to rise rapidly. One could argue that capital gains taxes across the Tasman, actually caused house prices to rise. The key is to making houses more affordable, is to increase the supply. This includes making it cheaper and easier to subdivide sections and bare land, and to allow the building of medium density dwellings, as they do in places such as Sydney. A capital gains tax will not achieve this.

WOFs for Residential Properties
Some commentators are suggesting that residential rental properties should be required to obtain a certificate of fitness on a regular basis - a bit like a warrant of fitness for your motor vehicle. Why make this change? We have not needed them so far. And what about the cost - someone has to pay an assessor. Landlords will not pay - they will simply pass this on to the tenant through higher rents. This is the last thing we require, given that rents now are already too expensive.

Interest Rate Direction
We are of the view that there will be no changes in mortgage rates this year. The reason we must ask, is why rates would rise? Interest rates will only rise when the economy starts to improve (it is not), when unemployment starts easing (it is not), and when inflation becomes a threat. The official inflation rate is now at its lowest level since the early 1960s. Until these factors change, interest rates will not rise. This is good news for those with mortgages - their interest rates will remain at these low levels for sometime yet.

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.