Issue 2017 / 8 19 May 2017
Welcome to the eighth fortnightly General Finance Mortgage Commentary for 2017. We aim to keep you informed on developments at General Finance Home Loans and the mortgage market in general.
The Money Market
This morning (9 am on 19 May 2017) the money markets were at the following levels:
Official cash rate 1.75% (unchanged)
90 day bill rate 1.99 (up from 1.95%)
1 year swap rate 2.04 (down from 2.07)
3 year swap rate 2.43 (down from 2.54)
10 year bond rate 2.82 (down from 3.02)
NZ/US dollar 0.6901 (up from 0.6870)
Negative Gearing
Negative gearing is in the news again. Negative gearing is where the owner of a rental property, can offset a rental loss against their regular income. A rental loss arises where their rental expenses (largely interest) are greater than their rental income. Rental losses used to be even larger, when depreciation could be included as an expense and when interest rates were higher. If a landlord is receiving a tax benefit of $20 - 40 each week from the Government, and this is stopped, they will look to recover it, in other ways. In a normal stable property market, the landlord would probably have to absorb some or all of this loss. In the current market, where there is a severe shortage of rental properties, the landlord will merely pass this on to the tenant. Abolishing negative gearing, in our current market, will cause rentals to increase. The question is why do this?
Insulation
Recent changes to the Residential Tenancies Act, mean that all rental properties must have ceiling and under floor insulation, where practicable, by 1 July 2019. Landlords should be aware that there are grants available, of up to 50%, in some circumstances. You may be eligible if your rental property was built before the year 2000, one of your tenants has a community services card or one of your tenants has been referred by the healthy homes programme of the Ministry of Health. To check your eligibility, visit www.energywise.govt.nz or telephone them on 0800 749 782. Some councils are operating similar schemes. It is worth contacting them. 2019 is not that far away.
Building of Houses
In election year we have one political party saying that we must build more houses. Over the past three years, the number of new dwellings being built has not kept up with demand. As anyone knows, who is looking for a builder, a roofer, or a tiler, they are most difficult to get, as there is just not enough of them around. Opening the flood gates to more immigrants is not the answer. One solution is to target the 600 - 700,000 New Zealanders living and working in Australia. A number of these people have appropriate building experience, know New Zealand and also have Australian experience. We could entice those wishing to return with transfer and relocation costs plus airfares. This is a way to specifically target a group of skilled immigrants.
Bridging Finance
The demand for bridging finance is strong. We are receiving more applications, than we have funds to lend. Most second tier lenders are in the same position. If you receive a loan proposal from us, it is best to decide quickly whether you require the loan and if so lock in your funding as soon as practical. This way you will not be disappointed.
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.