BORROWERS Mortgage Commentary 17 / 2015
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Issue 2015 /17       2 October 2015

Welcome to the seventeenth 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 2 October 2015) the money markets were at the following levels:
Official cash rate    2.75% (unchanged)
90 day bill rate       2.84 (up from 2.83)
1 year swap rate    2.70 (up from 2.68)
3 year swap rate    2.79 (down from 2.81)
10 year bond rate   2.97 (down from 3.01)
NZ/US dollar      0.6397 (up from 0.6368)

Two important pieces of legislation, that will directly affect property investors, became law yesterday (1 October). 

Foreign Buyer Regime
From 1 October any foreign buyer of property, must have a New Zealand IRD number and a current bank account with a local institution. In order to obtain a NZ IRD number, details will have to be provided on the applicant’s tax position in their local jurisdiction. Obtaining a NZ bank account is not straight forward - two pieces of ID are required, as well as proof of a residential address. This will stop some investors from buying property here. We believe this new law can still be circumvented by using nominee and shell companies, trusts and buyers of convenience. It will be interesting to see how far the enforcement agencies will go, to ensure these new laws are not circumvented. 

Brightline Test
This is a capital gains tax. If you sell a property, which is not your residence, within a two year period (as defined by the Act) you will be taxed. The tax amount is the lower of 10% of the sale price, or 33% of the gain. When a property is sold, the seller will have to complete a tax return. For most, if it is the family home, it will be a nil return. For certain property investors, tax will have to be paid at the time of sale. This will involve more work for solicitors and clients will, no doubt, be charged accordingly. 

From talking with insurance advisers, we are of the opinion that many homeowners are under insured. Gone are the days of buying a standard house owners policy, and having it cover the full rebuilding of your dwelling. Now you have to specify an exact amount, for which you wish to insure your house. Most people are unaware how much building costs are changing, and what additional costs there may be (such as council charges). It is important that, when you review your house insurance policy, you discuss it with your insurance company or broker. 

Our Mortgages
Just a reminder, that our interest rate for unregulated mortgages is 10.95%. We are able to lend for a range of loan purposes, such as asset lends, poor credit, bridging loans and so forth. One of our advantages is that we do look at loans throughout the country. Our loan size ranges from $50,000 to $550,000.  We will be increasing this size limit in November.

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.