BORROWERS Mortgage Commentary 08 / 2015
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Issue 2015 /8         29 May 2015

Welcome to the eighth 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 22 May 2015) the money markets were at the following levels:
Official cash rate    3.50% (unchanged)
90 day bill rate       3.49 (down from 3.55)
1 year swap rate    3.36 (down from 3.41)
3 year swap rate    3.47 (down from 3.50)
10 year bond rate   3.45 (down from 3.51)
NZ/US dollar      0.7178 (down from 0.7497)

The Budget
The budget was presented just over a week ago and within a couple of days all comments about it have ceased. For those with mortgages or looking to purchase a property, the budget was neutral.  The capital gain aspect, imposed on rental properties being sold within a two year period, was really showing the Government was doing something - but how effective it will be, remains to be seen. A comment that appears to be missing, is that slowing the property market, does enable the Reserve Bank to cut wholesale rates. We expect this to happen over the next three months.  This will assist those with mortgages, as interest rates will decrease.

New LVR restrictions on Rental Properties
On 1 October this year, the Reserve Bank will bring in some new criteria for those purchasing rental properties. All people wanting to borrow from a bank to purchase a rental property in Auckland will have to have a 30% deposit. This is unlikely to be onerous on seasoned investors, as many do have reasonable amounts of equity in their properties. It will stop a number of younger, higher geared, investors from entering the market. On a positive note, the Reserve Bank has eased up on the higher LVR owner occupied loans, for properties outside of Auckland. This makes sense, as in most provincial areas, property prices have been stable and have been this way for some time. The new rules do not apply to cash buyers or those who can access funds through private sources or from offshore.

Smoke Alarms
According to the NZ Fire Service, they attend just over 3,500 house fires each year, or about seven a week across the country. In 80% of all fatal house fires, which is a smaller subset of the above, smoke alarms where either not installed or they were not working. A good smoke alarm can be purchased for around $20. It is good insurance, but it is important to check the batteries each year.  Or for $45 - $60, it is possible to purchase a smoke alarm with a 10 year battery life.

Second Mortgages
A reminder that we still approve second mortgages. These are generally done when the borrower has some reason to keep the first mortgage in place and there is a reasonable amount of equity in the property. In most cases, the second mortgage is for a specific purpose, such as to purchase an asset like a motor home, pay tax or even to build a garage. Often after say 12 months, these loans can be consolidated into the first mortgage. We are happy to consider second mortgages on an interest only basis. 

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.