BORROWERS Mortgage Commentary 09 / 2016
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Issue 2016 / 9        3 June 2016

Welcome to the ninth 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 3 June 2016) the money markets were at the following levels:
Official cash rate    2.25% (unchanged)
90 day bill rate       2.42 (up from 2.37)
1 year swap rate    2.30 (up from 2.29)
3 year swap rate    2.30 (down from 2.34)
10 year bond rate   2.63 (down from 2.69)
NZ/US dollar      0.6809 (up from 0.6742) 

New Notes
In October last year the Reserve Bank first released its new bank notes for the $5 and $10 denominations. In late May, the new $20, $50 and $100 notes were released. They are bright in colour, just like the new $5 and $10 notes. It is likely to be some time before you start seeing these new notes. But do we really need a $5 note. When decimal currency came in 1967, a new fifty cent coin was released. This is now worth between $8 and $9 in today’s money. The five dollar note could be replaced by a coin. In 1967 the rare $100 note was also released, but nearly fifty years later, the denomination has not been increased.

Aussie Banks Crackdown on Foreign Lending
We have noticed that across the Tasman, the mainstream banks have tightened their lending conditions with non-resident buyers.  For example, National Australia Bank will now only lend up to a loan to value ratio of 60% to foreign buyers, down from 70%. We know that it is hard for a lending institution to confirm income generated offshore, undertake credit checks and to prove that the deposit comes from legitimate sources. We believe that with the anti money laundering laws, over time it will become even harder for non-residents to borrow from local banks.  This policy may, in a minor way, take some of the steam out of the housing markets. 

Kiwisaver Could Take the Pressure off  Housing
One of the reasons that many investors are snapping up rental properties (and making it harder for first home buyers to enter into the market) is that they are concerned about their own retirement savings. Many people distrust the sharemarket, do not understand bonds and are aware of recent negative publicity about the financial planning industry. Their only way to obtain more retirement income, or to build a nest egg, is by purchasing a rental property. We believe that if KiwiSaver was pushed more, and both individuals and employers contributed more, many young savers may view this as their main retirement vehicle. So far, the current Government has failed to either endorse or expand KiwiSaver. If this was to happen, more people may just increase their KiwiSaver rather than rushing out and purchasing a property to let.

Buying a Business
We are providing short term finance to a number of people who are wishing to purchase a business or a franchise. Often these are middle-aged buyers who have reasonable equity in their homes and often wish to quit the corporate environment. Mainstream lenders are reluctant to lend on new businesses. Once they have been going for twelve to twenty-four months and are proving successful, the loan should be easily refinanced to a mainstream lender.

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.