BORROWERS Mortgage Commentary 17 / 2014
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General Finance Mortgage Commentary

Issue 2014 / 27   26 September 2014

Welcome to the seventeenth 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 (9.00 am on 26 September 2014) the money markets were at the following levels:
Official cash rate    3.50% (unchanged)
90 day bill rate       3.73 (up from 3.71)
1 year swap rate    3.84 (up from 3.82)
3 year swap rate    4.19 (down from 4.22)
10 year bond rate   4.18 (down from 4.23)
NZ/US dollar      0.7926 (down from 0.8182)

Resource Management Act
One of the ongoing complaints that we hear, from those trying to build their own homes or those building to sell, is the difficulty in dealing with various councils over the Resource Management Act. This Act is being blamed for the shortage of residential properties being built in Auckland. As the new Government has a majority in the house, it can, if it has the will, now change the RMA. Areas needing attention include the slow approval process and current high compliance costs. The overall aim of the changes must be to get more people into homes, without the ever increasing costs.

Real Cost of Servicing a Mortgage
New Zealand is often accused of having high mortgage costs in relation to borrowers’ incomes.  This is only due to the fact that we have the highest borrowing rates in the OECD. For example, for a couple on an income of $100,000, borrowing $500,000 for 25 years at a 6.75% floating rate, this will represent 41% of their income.  If the borrowers were based in the UK, where on average rates are 2% lower, the debt servicing is a more respectable 34%. It seems a pity that first home buyers are penalised with higher mortgage rates and lending restrictions just because we have one of the better performing economies.

New Deposit Rates are Proving Popular
The new deposit rates for General Finance of 6.75% for 2 years and 7.00% for 3 years are proving popular. People are telling us how pleasing it is that they can now receive 7% on their investments. At this rate, depositors are ahead of inflation.  They can pay their taxes and still earn income to live off, without eating into their capital. If you would like to invest with us, at one of our great rates, or if you have some friends or colleagues in a similar position, please do not hesitate to contact us for a copy of our prospectus.

Bridging Finance
In the busy housing markets of Auckland and Christchurch, it is often hard to sell your property and then find exactly what you want in a new house, in the usual four to six weeks settlement period. Many end up having sold their property and not having bought a new one. The solution to this problem is bridging finance. We are happy to provide open ended bridging finance with capitalised interest for those wishing to bridge a housing transaction.

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.