Issue 2012 / 12   20 July 2012

Welcome to the twelfth fortnightly General Finance Mortgage Commentary for 2012.  We aim to keep you informed on developments at General Finance Home Loans and the mortgage market in general. 

The Money Market
This morning (9 am on 20 July 2012) the money markets were at the following levels:
Official cash rate    2.50% (unchanged)
90 day bill rate       2.67 (up from 2.65
1 year swap rate    2.55 (down from 2.74)
3 year swap rate    2.80 (down from 3.02)
10 year bond rate   3.18 (down from 3.43)
Kiwi dollar         0.8030 (up from 0.8021) 

Low Inflation
This week the consumer price index showed that prices rose by 0.3% in the June quarter, meaning that the official inflation rate is around 1%. Most people looking at their utility, rates, and insurance bills would think that inflation is a lot higher. Whatever your view, the interesting fact is that the latest figures will have an impact on interest rates and hence mortgage rates. One of the main reasons that the Reserve Bank increases its interest rates is to control inflation. Official inflation is under control, so there is no requirement for the Reserve Bank to increase interest rates.  This means that mortgage rates are likely to stay lower for longer. This is good news for those with mortgages.

Recovering House Prices
Inner city Auckland house prices are increasing. In the rest of Auckland, it is becoming easier to sell property. The Wellington muarket remains fairly static. Christchurch is a special case, but in the other main centres in the South Island, there is an increase in residential real estate activity. This should be viewed as positive. In many other jurisdictions, such as parts of the UK, Ireland, USA and Spain, the housing markets are quite dead. People will only purchase properties when there is some certainty about their employment, incomes, mortgage rates and the property market. Given what is happening in our property market, potential buyers are saying that our recession may be bottoming and things will start to improve. Our current recession started in 2007, and five years is a long time compared with other recessions that tended to last from one to three years.

Lending to a Trust
Lending to a trust is quite normal practice these days. All that is required is a little bit more paperwork and time. A lender will want a copy of the trust deed, to ensure that the trust is allowed to borrow. Further information may be required, such as financial accounts and bank statements. Finally, at settlement, all trustees must be available to sign the mortgage documents.  It is a good idea to contact all trustees in advance and make sure they are available on the settlement day, otherwise there will be delays.

Our Current Lending
Our current lending is focussed on short term proposals from one month to two years.  We will look at low doc and asset lending for a wide variety of purposes. Cleansing loans and loans to sort out tax issues are acceptable purposes. Traditional bridging loans are popular as well.

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.