BORROWERS Mortgage Commentary 19 / 2014
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General Finance Mortgage Commentary

Issue 2014 /19       24 October 2014

Welcome to the nineteenth 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 24 October 2014) the money markets were at the following levels:
Official cash rate    3.50% (unchanged)
90 day bill rate       3.68 (unchanged)
1 year swap rate    3.89 (up from 3.80)
3 year swap rate    4.18 (up from 4.14)
10 year bond rate   4.03 (down from 4.07)
NZ/US dollar      0.7825 (down from 0.7865)

Inflation Measures Are a Joke
Yesterday, Statistics New Zealand, announced a low inflation figure of 1.0%, for the year to September 2014. Is this really correct? If you look at house prices, rents, rates, power, water bills, transport costs and basic food items, they all seem to going up by an amount greater than this. Our inflation basket measures a wide variety of items, but many are discretionary, such as televisions, CDs, clothing, and household furniture.  These items have been getting cheaper due to our higher dollar, as most are now sourced from countries with lower labour costs than ours.  Should we not be measuring inflation using only the basic everyday items outlined above?  This would make our inflation rate several times higher and more accurate, as any person living on a fixed income can tell you.

More Paperwork is Required
If you are depositing money with or obtaining mortgage finance from any financial institution, more paperwork is now required.  This is due to the tough anti-money laundering laws that now exist.  Borrowers and depositors must now confirm their identity and this must be certified.  This means sighted and signed by a JP, lawyer, registered medical doctor or chartered accountant (amongst others).  Trusts must provide a certified copy of their trust deed and details about the source of funds or wealth of the trust.  ID for each trustee is required, as well as for named beneficiaries if the trust is non-discretionary.  Most borrowers and investors, particularly if they have a long history with an organisation, do find this annoying and unsettling.  This is the law and the best course is to be prepared for more questions to be asked and to have suitable identification always available (a passport is best).  There is more paperwork to do but this is a sign of the times.  

Fireplaces to Go
The Auckland Council is wanting to ban open fireplaces and certain types of wood burners.  Their public relations on this issue has been appalling. Firstly, they have not explained to us exactly how bad our air pollution is. Other cities, such as Christchurch, do have a pollution issue and have articulated this.  The second point is that the use of open fires and older style wood burners has been dropping at a steady rate for the past thirty years as alternative forms of heating become more attractive (such as heat pumps and the use of gas).  The correct policy is to retain the status quo, as in ten years time, if the current trend continues, fewer people will using open fires and older style wood burners than today. 

Business Finance
Many self employed people complain that business finance is almost impossible to obtain for the small or intending business owner.  This includes working capital advances, finance to purchase plant and equipment or to purchase a business itself.  This is true.  In most cases, if you have a small business and require extra funding, you have to use your own residential property as security. We are happy to lend here and provide both first and second mortgage finance for business purposes.

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.