BORROWERS Mortgage Commentary 20 / 2013
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General Finance Mortgage Commentary

Issue 2013 / 20   8 November 2013

Welcome to the twentieth 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 (9am on 8 November 2013) the money markets were at the following levels:
Official cash rate    2.50% (unchanged)
90 day bill rate       2.64 (down from 2.67)
1 year swap rate    3.02 (up from 2.98)
3 year swap rate    3.89 (up from 3.88)
10 year bond rate   4.65 (up from 4.56)
NZ/US dollar      0.8319 (down from 0.8418)

High Rates May Restrict LVRs
In certain areas of this country, such as Northland and Kaipara, rates are becoming a major household expense. If for any reason, they are not paid for a year or so, they can easily mount up. This may cause lenders to start easing back on their lending ratios, as they know unpaid rates will bite into their available security cover. Add to this a low growth situation, and lenders may well restrict LVRs further. Councils need to realise that they can no longer just keeping hiking rates well above the rate of inflation. It may well lead to other consequences.  

Planning for Growth
The greater Auckland council is slow at incorporating growth into their planning. We certainly need more land made available for housing, better roads to speed up traffic flows and further improvements made in public transport. Another issue, of which our planners need to be aware, is just how many people who are currently overseas, can come and live here (as of right). We know that there are around 800,000 Kiwis living overseas.  There may be a further 700,000 with this right, such as the children of these people living overseas.  Imagine if there was a world disaster, such as a major terrorist attack, or a nuclear accident and 20% of these 1.5 million people returned. That is 300,000 people and we know a fair majority of them would come to Auckland. This large contingent liability needs to be considered in our infrastructural planning.

KiwiSaver Balances 
Almost $300 million is going into KiwiSaver each month. Individual balances are starting to increase and within a few years they will be meaningful amounts.  A unique feature of the scheme is that funds can be withdrawn to purchase your first residential dwelling. This may well emerge as the main method for young people save to purchase their first house - a bit like the home ownership accounts, banks offered in the 1970s and early 1980s. It has several advantages: as money is taken from source, you do not see it; funds are taken from each job a person has; and basically it cannot be touched.  It is a good way to, not only save for your superannuation, but for your house as well. 

Tax Problems
As an asset and low doc lender we are happy to advance funds for those that having existing tax arrears and wish to come to an arrangement with the tax department. This type of problem is ideally suitable for a short term lender such as ourselves.  Once the applicant has evidenced a clean repayment history, say after 6-12 months, they can go back to a mainstream lender. We welcome your enquiries.

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.