General Finance Mortgage Commentary

Issue 2013 / 7   10 May 2013

Welcome to the seventh 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 (9am on 10 May 2013) the money markets were at the following levels:
Official cash rate    2.50% (unchanged)
90 day bill rate       2.65 (up from 2.64)
1 year swap rate    2.67 (down from 2.68)
3 year swap rate    3.01 (up from 2.98)
10 year bond rate   3.25 (up from 3.15)
NZ/US dollar      0.8449 (up from 0.8432)

P Labs
The drug P has been around now for over 15 years. It is a highly addictive substance and it is a dangerous drug to manufacture. An issue that affects both landlords and potential purchasers of dwellings is that if a property has been used for the manufacture of the illicit drug, it has the potential to leave a toxic environment behind that will remain years after production has ceased. The issue arises is how do you protect yourself from this? First you should ask your land agent. They have a duty to inform you if they know. They may not. A second way is to seek out an expert in this area who can test your property. If you suspect your potential new house may have been used as a P lab you should consider the above two options. 

Construction Loans
We have expanded our product offering to include construction finance. We can lend up to 50% on the land value and then up to 70% on the construction amount. We are happy with progress payments supported by a valuer’s statement. We will require a registered builder to carry out the construction with a fixed price contract. Before commencing we will require council approval of the dwelling. We are offering a standard construction product but with a bit more flexibility than what the banks offer. It will only be offered in the greater Auckland area.
See http://www.general.co.nz/loantypes.htm   

Under Insurance
It is important to insure your property and contents at the appropriate values. If you do not review your policies following the purchase of additional contents item you may end up in an under insured position. For example, say your contents are worth, at market value, $100,000 and you have them under insured at $50,000. If you suffer a burglary and $25,000 of your contents is stolen, your loss is $25,000. However if your policy is “subject to average” then the claim paid will be $12,500. This is the caused by the under insurance.  It is worth checking whether you have a “subject to average” policy and if you have adequate cover. 

Mortgage Rates Across the Tasman
The good news for Kiwis is that our mortgage rates are still marginally lower than those being offered across the Tasman.  Our floating rates are in the high 5% like in Australia, but we can obtain attractive short fixed rates with 6 or 12 month terms. The big difference in our two markets is that there is a far more competition in the Australian market from a plethora of lenders including several non-banks, building societies and credit unions. On top of this, in Australia, there are always are variety of lenders that are offering a special to attract new borrowers. Our market could certainly benefit from more competition.

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.