General Finance Mortgage Commentary

Issue 2013 / 17 27 September 2013

Welcome to the seventeenth 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 27 September 2013) 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 2.93 (down from 2.96)
3 year swap rate 3.86 (down from 3.97)
10 year bond rate 4.62 (down from 4.77)
NZ/US dollar 0.8246 (up from 0.8124)

Leasehold Land
Owners of leasehold land, often ask whether they have the right to freehold it. Firstly you need to have a look at your lease agreement. A few agreements allow you to freehold, as of right, but most do not. The right to freehold is at often the freeholder's (lessor's) behest. But you should not be put off by this. There is nothing wrong with contacting the lessor and enquiring whether the freehold is for sale. They may say "yes". All that is then required is to agree a suitable price.

Further Solution to the Auckland Property Market
Another way to ease the housing congestion in Auckland, and to assist first home buyers, is to have a rapid rail network between Auckland and Hamilton. Houses are considerably less expensive there, and Hamilton has a good civic infrastructure in place. A rapid train system would allow people to have all the advantages of working in Auckland or Manukau (such as higher rates of pay) but with the benefit of the cheaper housing options in Hamilton. If twenty thousand more people chose to live in Hamilton, it would take some housing pressure off Auckland and give Hamilton a boost at the same time.

Mortgage Problems
If for some reason, you or your client are unable to make a mortgage payment, our advice is for the borrower to contact their lender as soon as possible to let them know. Lenders are aware that in some circumstances this can happen - for example, due to the loss of work or sickness. Lenders can offer mortgage holidays, interest only periods or just delay the payment for a month. It is important that once an agreement is made, it is adhered to. From a lenders point of view, the worst thing is to hear nothing. It is important to talk with your lender sooner rather than later.

Low Doc Borrowing
Over the past few months a considerable amount of our lending has been low doc lending, for terms varying from 6 to18 months. Most of the borrowers are restructuring their affairs, giving themselves time to say sell a property, to pay outstanding tax or expanding their businesses. Once the restructure has been completed they will be in a better position to move to a mainstream prime lender.

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.