BORROWERS Mortgage Commentary 07 / 2016
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Issue 2016 / 7        6 May 2016

Welcome to the seventh fortnightly General Finance Mortgage Commentary for 2016.  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 6 May 2016) the money markets were at the following levels:
Official cash rate    2.25% (unchanged)
90 day bill rate       2.40 (up from 2.31)
1 year swap rate    2.23 (down from 2.32)
3 year swap rate    2.25 (down from 2.30)
10 year bond rate   2.65 (down from 2.87)
NZ/US dollar      0.6884 (down from 0.6913) 

More Rate Cuts Coming
Earlier this week the Australian Reserve Bank cut the overnight bank rate from 2.00% to 1.75%. A week earlier our Reserve Bank did not cut its rates.  As a result our currency has firmed rather strongly to 92 cents against the Australian and up to 70 cents against the US.  This is hurting exporters.  When our Reserve Bank reviews the OCR in June, we believe that it has no choice but to cut and possibly again in August. Mortgage rates have bottomed, and there is unlikely to be much more downward pressure, but those with bank deposits will see further minor declines. 

Tenants’ Rights are Creeping
There is a trend emerging with the Government slowly pushing more obligations onto landlords, in favour of those renting.  From July this year, rental properties must have smoke alarms and insulation is to be of a certain standard. This will be further toughed up in 2019, when rental properties must have ceiling and floor insulation when practicable. We believe that over the next few years, more tenant favoured laws will be passed.  These may include longer periods  being required to remove a tenant, rental increases restricted to once a year, compulsory heat pumps and  clauses such as the interior repainting every three or five years.  The Government has to be careful, as the last thing it wants is rents to increase and the number of available rental properties to decrease.

Building Consents Rising But Too Slowly
Nationally the number of building consents being issued, for new dwellings, was 28,000 to the end of the March year. The last time this figure was matched was in 2004, before the global financial crisis. Only four years ago the national figure was around 15,000. The issue is that the level is still not high enough. Residential construction is a big employer, but a number of developers are saying it is getting harder to find skilled trades people. It must be emphasised that one of the most effective ways to stabilise house prices is simply to build more. This is more effective than enacting a number of new laws such as land taxes, that do not make much sense.  

Lending on Sections
We are asked, on a regular basis, whether we lend on sections. The answer is yes - on standard residential sections in the main centres. We are happy to lend up to 70% on them. In smaller centres or out in country areas we will reduce our LVR’s accordingly.  We do not lend on commercial subdivisions. If a borrower wishes to purchase piece of land to cut up into a couple of sections, we are happy to consider this.


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.