Issue 2013 / 5   12 April 2013

Welcome to the fifth fortnightly General Finance Mortgage Commentary for 2013.  We aim to keep you informed on developments at General Finance Home Loans and the mortgage market in general. 

The Money Market
This morning (10 am on 12 April 2013) the money markets were at the following levels:
Official cash rate    2.50% (unchanged)
90 day bill rate       2.65 (unchanged)
1 year swap rate    2.72 (up from 2.71)
3 year swap rate    3.06 (down from 3.08)
10 year bond rate   3.35 (down from 3.59)
NZ/US dollar      0.8628 (up from 0.8371)

Curbing House Price Growth
The Government, fearing that a bubble is developing, has recently been making noises about trying to curb house price appreciation, particularly in Auckland. There really is not much they can do. The Reserve Bank cannot just targetAuckland and the Government is unable to direct privately owned banks where to lend. Auckland’s problem is about supply. To slow house price growth there needs to be more dwellings built. More land must be made available and the consent process should be made cheaper and faster. Auckland is currently in a rapid growth phase - this needs to be recognised by our politicians. This is nothing new – Sydney, for example, went through the same issues in the 1970s and 80s.

Apartments
One way to make housing affordable is for more people to live in apartments, just like they do in other major cities around the world. This has some merit, but over the past decade or so a number of people have suffered both financially and stress-wise when they find their apartment has leaky building syndrome. Before apartments can be considered an attractive alternative, buyers must have 100% confidence that the building materials used are up to standard and that there is a trustworthy certification process in place which can be called to account. Until this occurs, the apartment sector will not develop to its full potential.

Borrower is a Trust
A number of properties in this country are owned by family trusts.  A trust can borrow funds to purchase a dwelling just as if it is a natural person. However there are some differences. If a trust is the borrower there will be additional paperwork required. Copies of the trust deed will be required by the lender, as well as bank statements and a statement of position. A lender will require a guarantor - often a beneficiary or the settler. Financial details will be required on this person. Finally at drawdown time all trustees have to be available to sign the mortgage documents.  In summary using a trust as a borrowing entity is fine, but it will involve more paperwork and time.

Our Deposit Rates
General Finance, as well as being a lender, is a deposit taker with a registered prospectus. This means that we are able to receive monies from the public. Currently we are offering terms from 6 months through to 5 years. Our highest rate is 6%. If you have funds to invest, we would like to hear from you.  Please to do not hesitate to contact us for further details and a copy of our prospectus.

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.