BORROWERS Mortgage Commentary 10 / 2015
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Issue 2015 /10       26 June 2015

Welcome to the tenth 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 26 June 2015) the money markets were at the following levels:
Official cash rate    3.25% (unchanged)
90 day bill rate       3.27 (down from 3.29)
1 year swap rate    3.09 (down from 3.19)
3 year swap rate    3.18 (down from 3.35)
10 year bond rate   3.69 (up from 3.61)
NZ/US dollar      0.6898 (down from 0.7030)

Rising House Prices
There is considerable discussion in the media about the continued rise in Auckland house prices – they have increased by 14.6 % in the past year. Taking a broader view, this is not just an Auckland phenomenon. In the past year, house prices have increased by 14.9% in Sydney, fuelled in part, like the Auckland market, by wealthy offshore buyers. A similar thing is occurring in London, with house prices rising by 12% to the end of March this year. Since the election there, a few weeks ago, the housing market has continued to firm.  

Rates Rises
During August, Auckland homeowners will be receiving their new rates notices. This will be depressing news for most homeowners, as there is expected to be a minimum increase of around 10%. We know there will be a general increase of 2.5%, together with a special transport levy of 4.4%.  Last year’s property revaluations will be used, and these vary considerably from suburb to suburb.  The business differential is expected to ease a little, meaning that businesses will pay less and householders will pay more.  This is unacceptable, as most organisations and individual households are expected to live within their current means. There is no doubt that rate increases will be a big issue in next year’s council elections.

P Labs
The production of “P” is a major scourge in our society and is doing considerable harm. Most “P” is manufactured in backyard operations in residential dwellings. It is a significant problem in state houses, but also being done in both rental and owner occupied dwellings as well.  The problem with the manufacture and use of this drug, is that it leaves a long duration toxic residue. It is now such an issue, that if you are spending hundreds of thousand on a property, then it is a good idea to get a test to see if this drug residue is present in your proposed new house. If you move in and find it is present, it can cost tens of thousands of dollars to make your house safe, as it may affect your heath.  You should check with your solicitor whether you should get your new home tested, before your sale and purchase agreement becomes unconditional. 

Asset Lends are Fine
As a result of the new Credit Contracts and Consumer Finance Amendment Act 2014, it is more difficult to do no financial or low doc type transactions. One area where this can be done is with bridging finance. These loans may not fully service, but if there is a sound reason why they require the finance - to buy another home before they have sold their current one.  The takeout is the sale of the existing dwelling. This type of finance allows a purchaser to find their ideal new home and gives them more time to maximise the sale price of their existing one.  

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.