BORROWERS Mortgage Commentary 03 / 2016
Borrowing Costs
Application Forms
Apply Online
Type of Loans
Like a Loan?
Fortnightly Newsletters
Loan Calculators
Broker Help Zone

Contact us
Switch to Investors

Issue 2016 /3         11 March 2016

Welcome to the third fortnightly General Finance Mortgage Commentary for 2016.  We aim to keep you informed on developments at General Finance Home Loans and the mortgagemarket in general. 

The Money Market
This morning (9am on 11 March 2016) the money markets were at the following levels:
Official cash rate    2.25% (down from 2.50%)
90 day bill rate       2.30 (down from 2.56)
1 year swap rate    2.26 (down from 2.55)
3 year swap rate    2.30 (down from 2.47)
10 year bond rate   2.93 (down from 2.97)
NZ/US dollar      0.6657 (down from 0.6723)

Official Cash Rate
Yesterday the Reserve Bank lowered the Official Cash Rate from 2.50% to 2.25%. This took the market by surprise, as many were predicting a cut, but not until June.  The reasons givenwere sound: a deteriorating world growth outlook, extremely low inflation and a difficult dairying sector. The immediate effect was seen in our currency, particularly against the Australiandollar, which eased to under 90 cents. There were decreases, albeit smaller, against the USD dollar and the Euro. Mortgage rates are unlikely to change this time round.

If you are using a trust or a company to borrow funds, in order to purchase a property, a personal guarantee will be required.  This is sound banking practice, as you are taking the risk, not the bank. When your loan is repaid, we suggest that you contact your lender to formerly release your guarantee.  There have been cases when a guarantee has been given, the loan repaid,but the guarantee has not been released. At some time later, the unreleased guarantee has then been enforced against the borrower, to support an unrelated borrowing that has got into difficulties (when the borrower is just one of several parties to a further borrowing). Giving a guarantee is a serious obligation and needs to be treated in that way.

Erosion of Trusts
During the 1990s, there was a surge in the number and in the popularity of trusts.  Trusts at the time offered a number of benefits.  We feel that over the past ten years, there has been an erosion in the benefits of using a trust structure.  This erosion includes legislative changes in the property relationships area, where trusts can be looked through. Creditors have more rights and discretionary beneficiaries can ask for more information.  Administration of trusts is becoming more onerous, particularly in the areas of opening a bank account or making an investment. This is a pity, as trusts still do offer some real advantages, for estate and succession planning and in protection from creditors.

Simple Seconds
Recently we have been doing a number of second mortgages. Typically they are to people with a reasonable amount of equity in their homes.  They have a project in mind such as buying a business or a franchise and they do not want to disturb their first mortgage relationship, as their additional borrowings are for a short duration.  Recently we approve a loan on a property valued at $1.2 million.  We provided a short term second of $150,000 for 12 months (behind the first mortgage of $440,000) to allow the borrower to acquire a franchise.

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.