BORROWERS Mortgage Commentary 06 / 2015
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Issue 2015 /6         1 May 2015

Welcome to the sixth 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 1 May 2015) the money markets were at the following levels:
Official cash rate    3.50% (unchanged)
90 day bill rate       3.64 (up from 3.62)
1 year swap rate    3.53 (down from 3.59)
3 year swap rate    3.51 (up from 3.35)
10 year bond rate   3.30 (up from 3.16)
NZ/US dollar      0.7621 (down from 0.7672)

Further Changes to KiwiSaver
The Court of Appeal recently decided that the official assignee (and hence creditors) cannot access the KiwiSaver account of those who have been made bankrupt.  Previously it was believed that the official assignee could access a bankrupt’s KiwiSaver account, but only when the bankrupt would have been able to access it under the KiwiSaver rules (say at age 65). This recent court case has clarified the issue.  This is likely to make KiwiSaver more popular, as it can now be used as an asset protection strategy. People have always looked at ways to protect their assets from creditors (hence the popularity of trusts).  Kiwisaver is another tool that can assist individuals to meet this objective. 

Yesterday the Reserve Bank reviewed the Official Cash Rate (OCR) and predictably announced there would not be any changes.  The OCR remains at 3.50%. What is important is the tone of the announcement.  Near term rate increases are out, but if inflationary pressures weaken further and there is any easing in the economy, rates will be cut.  Most market commentators are predicting one or may be two rate decreases towards the end of the year. We believe that if it was not for the strong Auckland housing market, rates would be cut immediately. This is all good news for those with mortgages, there is a good chance rates will be easing later this year. 

Changes in Legislation
On 6 June this year, significant changes to the Credit Contracts and Consumer Finance Act 2003, together with the Responsible Lending Code come into effect.  These changes affect all those who lend money, right from pay day lenders through to the banks. Briefly, the changes involved require lenders to take extra care to ensure the loan being offered meets the borrower’s needs and secondly that they can meet the scheduled payments without undue hardship. Any guarantors will now have to be assessed as vigorously as the principal borrowers. The effects of all this will mean that quite large segments of the population may not have access to credit.  Whether criminal elements will fill this void is not yet known, but there is a risk that they will. 

Funds to Lend
Currently we are receiving an inflow of funds into our finance company and so we have funds to lend. Over the past month we have made loans for a number of purposes including: borrowers paying penalty tax and tiding up their tax affairs; purchasing sections either to hold or to build a spec house on at some future time; and various types of cleansing loans (consolidating many short term loans into one). We welcome these types of 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.