Issue 2016 / 6        22 April 2016

Welcome to the sixth fortnightly General Finance Mortgage Commentary for 2016.  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 22 April 2016) the money markets were at the following levels:
Official cash rate    2.25% (unchanged)
90 day bill rate       2.31 (down from 2.33)
1 year swap rate    2.32 (up from 2.16)
3 year swap rate    2.30 (up from 2.24)
10 year bond rate   2.87 (up from 2.83)
NZ/US dollar      0.6913 (up from 0.6777) 

Foreign trusts and anti money laundering
Anyone who has recently made an investment with a bank or finance company or taken out a mortgage, will realise that a number of questions have to be answered about your financial affairs and various pieces of identification are required.  We are wondering if the, so called, foreign trusts that are domiciled here, have to provide similar information.  If they do not, they could be used for money laundering purposes. There may be two rules operating- stringent ones for local residents and more relaxed ones for foreigners. We hope this is not the case. 

More mortgage restrictions have to come
Unfortunately this is likely to be the case.  The Government’s attempt to free up more land around Auckland has been slow in coming and to date has not been very successful.  Attempts to grant quicker approvals for land subdivision and building consents, by the Auckland City Council, have failed to materialise. Residential property in Auckland, as in other cities, (such as Wellington, and provincial areas like Hamilton and Tauranga), appears to be a one way bet. They will continue to rise for sometime yet. We do see more mortgage restrictions coming, but they must not penalise first home buyers, as this very group must be able to purchase a residential property to live in.

Further mortgage drop unlikely
Virtually all market commentators are saying there will be at least one, but probably two more rate cuts this year. In the past, this has lead to mortgage rate cuts.  Last month, when rates were cut, mortgage rates virtually remained the same.  Any further cuts made by the Reserve Bank will have the same effect.  The reason for this, is that the banks are having to fund their lending operations through wholesale and off shore means. Over these past few months the costs to do this has been increasing.  On the deposit side, investors are increasingly rejecting low bank interest rates of 1-3%. This is partly the reason why our share market has been firm. People are looking for yield, some have been purchasing rental properties or seeking higher yielding stock, such as that offered by General Finance. Others have approached professional fund managers in the hope for better returns.

Need to pay tax
Currently it is tax time.  Individuals, trusts and companies are starting to prepare their tax returns. Some people and entities have tax to pay, and this may be quite large sums. If you are in this situation and you offer to pay the Inland Revenue Department in one instalment, a discount can often be negotiated.  We are happy to provide second mortgage finance in these circumstances.

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.