BORROWERS Mortgage Commentary 02 / 2014
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Issue 2014 / 2   27 February 2014  

Welcome to the second fortnightly General Finance Mortgage Commentary for 2014.  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 27 February 2014) the money markets were at the following levels:
Official cash rate    2.50% (unchanged)
90 day bill rate       2.96 (up from 2.93)
1 year swap rate    3.47 (up from 3.45)
3 year swap rate    4.09 (down from 4.17)
10 year bond rate   4.51 (down from 4.61)
NZ/US dollar      0.8320 (up from 0.8308)

Hot Property Spots in Auckland
We are seeing the demand for property starting to spread beyond the inner city Auckland suburbs. Last year, some of the more modest suburbs, experienced the biggest price rises - Waterview at 20%, Kelston at 22%, Point England 22% and Mangere Bridge at 20%. This ripple effect will continue and will start to have a positive effect on parts of Manakau and Henderson this year. The current LVR restrictions will have an impact on these areas but we believe this will be relatively minor. 

WOFs on Properties
Certain groups have been advocating for rental properties to meet certain requirements, similar to a warrant of fitness for a car. This is all nice in theory, but the issue here is the cost involved. These costs will most certainly be passed on as higher rents. Rents in the major cities are already expensive; do we really want them to go higher?  Some sub standard properties, particularly in provincial areas (which people are happy to occupy at reduced rents), may have to be withdrawn from the market, forcing up rentals in these areas. It is best to let the market solve this issue. If tenants start demanding better quality properties, then landlords will have to tidy them up to meet these higher expectations. 

The Silent Rates Rises
Around the country, local councils are increasing rates considerably more than the rate of inflation.  In Auckland, there is a further rates charge - water rates. Originally, when this charge commenced, it was relatively small and consumers were billed every second month. These charges are rising and they are now quite significant for individual households.  As a result the bills are now being sent out monthly. What is surprising, is how little opposition there has been to the recent water rates increases. We would have thought that local people would be demanding more efficiencies from our water provider, Watercare.

Monthly Income Debentures a Hit
We have a good offering to investors which few others can match. Most investors are paid either quarterly or six monthly on their investments. We do one better - we offer monthly income debentures. So someone who invests $10,000 or more with us can have their interest paid out monthly. Our new two year rate is 6.50%. This is most useful for the retired with regular monthly outgoings or those used to being paid monthly and preferring a regular monthly cash flow.

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.