Issue 2015 /12       24 July 2015

Welcome to the twelfth fortnightly General Finance Mortgage Commentary for 2015.  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 24 July 2015) the money markets were at the following levels:
Official cash rate    3.00% (down from 3.25%)
90 day bill rate       3.07 (down from 3.25)
1 year swap rate    2.87 (down from 2.97)
3 year swap rate    2.96 (down from 3.06)
10 year bond rate   3.38 (down from 3.44)
NZ/US dollar      0.6610 (down from 0.6740)

Ownership of Properties in New Zealand
As a country, we reached our highest level of home ownership in the early 1990s, with about 74% of the dwelling occupants in this category. By 2013, this had decreased to around 65%.  Since the early 1990s, family trusts have become an increasingly prominent feature - to the point where it is estimated that around one in five properties are now owned by these entities.  Around 50% of family owned dwellings are mortgage free. This is logical, as there is a high level of home ownership among retired people, who are no doubt mortgage free.  It is easier to become mortgage free in a number of provincial cities and towns, were houses are cheaper.  There is less information on the number of houses owned by offshore parties. It is fair to say that it is growing, but the Government’s new requirements (for offshore parties to have a tax number and a bank account here) will, in a few year’s time, ensure there is more information available on this subject.

Assisting the Next Generation into Property.
One way for younger people to enter the property market is to form a property partnership where two, three or even four people pool their combined incomes and assets, in order to purchase a property.  This will enable the partnership to purchase a more expensive property in a better area, than any of the individual partners could do on their own. One caveat, that must apply, is there must be a clear set of rules set out in the partnership agreement, which show, amongst other things, how contributions are made and what is required to exit the partnership.

Rental Property WOF’s
This issue raises its head from time to time. What surprises us, is that those raising the issue, are not suggesting that it should apply to owner occupied homes.  If WOFs were to be applied to the rental housing market, who would police them?  It just does not make sense. There is a cost to all this. For those in private rentals, the WOFs will be paid by the tenants through an increase in rent, and with state houses, it will be the tax payer who has to pay.  A better way would be to offer tax incentives to landlords, to offset their costs of insulating their properties. 

Open Ended Bridging
We are receiving an increasing number of enquiries about open ended bridging.  This is where you have decided on the new property that you wish to purchase, but have not sold your existing one.  More people are looking at this type of finance, because if you sell your family home, it can be difficult to find something that you are entirely happy with, in a limited timeframe.  The solution is to bridge the purchase and sale period - to enable you to purchase exactly what you want, with a reasonable amount of time then available to sell your existing property.

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.