Issue 2011 / 11   1 July 2011

Welcome to the first fortnightly General Finance Mortgage Commentary for 2011.  We aim to keep you informed on developments at General Finance Home Loans and the mortgage market in general.  Previous issues of this commentary can be found on our website http://www.general.co.nz/newsletters.htm

The Money Market
This morning (10 am on 1 July 2011) the money markets were at the following levels:
Official cash rate    2.50% (unchanged)
90 day bill rate       2.65 (down from 2.66)
1 year swap rate    2.90 (up from 2.84)
3 year swap rate    3.75 (up from 3.73)
10 year bond rate   5.07 (up from 5.00)
Kiwi dollar         0.8286 (up from 0.8060) 

Assisting the Next Generation into Their Home
As houses are getting more expensive, particularly in our larger cities, it is becoming increasingly difficult for first home buyers to purchase a property.  In some cases, families are prepared to assist. If parents have surplus cash or can increase their own mortgages, they then can on-lend or gift it to their children.  It is important to make the right decision. If the child is in a relationship and it breaks down, a gift is likely to become part of the overall relationship property.  To avoid this complication, you can loan the funds and take a second mortgage over the property.  This is likely to fall outside any relationship issues should there be any. Whether you charge interest or even insist on repayment - that is up to you.  

Unit Title Changes
From 20 June 2011 significant changes occurred for those selling properties that are unit titled. Sellers now have to provide greater disclosure about the details of the body corporate to intending purchasers. This is a result of the new Unit Titles Act which was passed last year. This is a new requirement which is reasonably complex, and has not been well covered in the media.  Our advice is, that if you are selling a property which is subject to a body corporate, discuss it with your lawyer to ensure you make the correct disclosure. There are penalties if you do not. 

Sale and Purchase Agreements - Finance Clause
Buying a home or a rental property is often a stressful event. One of the documents you will have to sign is a sale and purchase agreement. This document allows you to add additional clauses, such as the requirement for an acceptable builders report. Another condition, we believe the majority of buyers should include, is a finance clause - along the lines that settlement will only occur if suitable mortgage finance is obtained. The reason we say this, is that most mortgage lenders terms and conditions are constantly changing. Over the past three years it has become increasingly difficult to obtain housing finance. You may honestly believe that you qualify for finance but you may not. If there is any degree of uncertainty, it is always best to insert a finance clause. 

Trusts and Insurance
There are a number of trusts operating in this country. Many of these trusts contain just one asset, the family home. As the ownership of the family home has often moved from the two partners to the trust, other issues need to be addressed to reflect this change in ownership. It is most important that you inform your insurance company that this has occurred, so they can note it on your household policy.  The last thing you want, is to have an insurance claim without the ownership details of the property being correctly recorded. Your local council should be advised (with a copy of the title) as well so your rates notices go to the new entity. 

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.