BORROWERS Mortgage Commentary 05 / 2015
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Issue 2015 /5 17 April 2015

Welcome to the fifth fortnightly General Finance Mortgage Commentary for 2015. 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 17 April 2015) the money markets were at the following levels:
Official cash rate 3.50% (unchanged)
90 day bill rate 3.62 (down from 3.64)
1 year swap rate 3.59 (up from 3.57)
3 year swap rate 3.35 (down from 3.58)
10 year bond rate 3.16 (down from 3.25)
NZ/US dollar 0.7672 (up from 0.7449)

Changes to KiwiSaver
There are changes underway to KiwiSaver, to make it easier for people to use their KiwiSaver to assist with purchasing their first home. Changes include being able to withdrawal the Government tax credit, making available more funds. Early withdrawals will be allowed to cover such things as paying a deposit. This is all positive, but we believe it does not go far enough. We believe that KiwiSaver providers should be in the mortgage market, providing second mortgage finance to first home buyers. It would work something like this: the borrower will use their 5% deposit from KiwiSaver, a bank loan to borrow 80% and will use their KiwiSaver provider for the remaining 15% by way of a second mortgage. This is positive for the KiwiSaver provider as second mortgages will provide a higher return than Government or local council bonds and it will provide some asset diversification.

Using Property Investors to Assist Housing Supply
The residential investor is accused of many things, including that they are actively competing in the housing market and that they are depriving first home buyers of a property to own. This is not correct. Why not turn this around and use this group to assist with solving the housing shortage, particularly in the Auckland and Christchurch markets. Investors do have the resources and skills, but incentives will have to be provided. One that could be offered is to allow depreciation to be claimed on brand new dwellings. Depreciated was scraped a few years back on rental properties. If the right incentives are provided, we may see this large group, building new houses which in the longer term will assist in providing a greater supply of houses.

Property Prices
The past year, to March 2015, has been good for the residential property market. According to the Real Estate Institute, Auckland's median price has jumped by 13% to $720,000. Nationwide, the median price is $475,000. This is largely being driven by the Auckland effect. If Auckland is excluded from this figure, the median house price, across the country, is $350,000. The growth in the past twelve months has been uneven - the main areas being, Auckland, Christchurch and Tauranga. Low growth areas include Invercargill, Dunedin and Hastings.

Borrowing to Pay Tax
We are one of the few asset lenders in the market. We are happy to lend to people who wish to pay their tax or pay tax arrears. There are two ways we do this. We can take out the existing first mortgage and advance additional funds with the borrower refinancing to a mainstream lender in 6-12 months time. Alternatively we can look at second mortgage finance. Again this can often be consolidated with the first mortgage lender after 6-12 months.

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.