Issue 2015 /15       4 September 2015

Welcome to the fifteenth 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 4 September 2015) the money markets were at the following levels: 
Official cash rate    3.00% (unchanged)
90 day bill rate       2.91 (up from 2.90)
1 year swap rate    2.78 (down from 2.81)
3 year swap rate    2.88 (down from 2.95)
10 year bond rate   2.97 (down from 3.01)
NZ/US dollar      0.6398 (down from 0.6630)

LVR Changes for Investors
Back in May, the Reserve Bank published new rules regarding loan to value ratios for those using borrowed money to purchase rental properties. Buyers will now need a 30% deposit in order to fund an investment property through a bank. The new rules will apply from 1 November. This will affect those with one or two rental properties but is less likely to impact those with several, as they will be able to drawdown on existing mortgages to meet this new threshold.  At the same time, the Reserve Bank is allowing the trading banks to provide more higher LVR loans (above 80%) to first home buyers. This is positive. 

Migration
Over the past three years our net immigration (difference between total arrivals and departures) was a positive 111,000. In the preceding three years, the figure was negative. A large number New Zealanders have been returning from overseas. Many of the new immigrants are students, who are here to study, and most will return to their country of origin. The real issue is that the largest percent of the new arrivals are coming to Auckland, which currently has the most job opportunities. Although we have a surplus of houses in many provincial areas, and houses are much cheaper, Auckland is seen to be where the opportunities are. This is unlikely to change.   Any increase in immigration or refugee numbers will put more pressure on Auckland’s bursting infrastructure and housing, both of which are under significant pressure. 

KiwiBank’s First Dividend
When KiwiBank was first established, thirteen years ago, many people asked why we needed another bank, given that it would compete with the home grown financial institutions such as the long established credit unions, building societies, finance companies and the newer mortgage managers. How successful has KiwiBank been? Our view is not very. It has under 4% of the New Zealand market, based on total assets. Westpac has over 19%. What is worse, is that it is only paying its first dividend this year - thirteen years after it was established. This is certainly not a good deal for NZ taxpayers or the Government. 

Additional Funding when the Banks say No
Banks are constantly changing their lending policies. Some borrowers are finding that although they have good equity, the bank can still say no. These are the types of borrowers we can assist. Often, we can bridge these borrowers for a period and during that time, if their position improves, or the banks’ criteria changes, these borrowers are able to refinance with a mainstream lender.

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.