Issue 2011 / 15   26 August 2011
 
Welcome to the first fortnightly General Finance Mortgage Commentary for 2011.  We aim to keep you informed on developments at General Finance Home Loans and the mortgage market in general.  Previous issues of this commentary can be found on our website http://www.general.co.nz/newsletters.htm
 
 The Money Market
 This morning (9 am on 26 August 2011) the money markets were at the
 following levels:
 Official cash rate      2.50% (unchanged)
 90 day bill rate        2.91 (up from 2.86)
 1 year swap rate        3.16 (up from 3.10)
 3 year swap rate        3.65 (down from 3.68)
 10 year bond rate       4.52 (up from 4.49)
 Kiwi dollar     0.8290 (down from 0.8310)
 
 House Prices are Rising in Auckland
 Anyone driving around Auckland, particularly the inner city suburbs,
 will see a number of "For Sale" signs with "Sold" on them. Houses have
 been selling more quickly and it is only a matter of time, before prices
 start rising. The reason for this is the lack of supply. This is caused
 by a number of factors, but one important one is the diminishing number
 of finance companies who were once of the most important providers of
 residential construction finance. If people are unable to build more
 houses, and Auckland continues to grow, then prices can only go up. What
 we need are more providers of residential construction finance to enter
 the market again.
 
 Auckland City Council Rating Valuations
 Currently the new Auckland City Council is carrying out their triennial
 valuations for all the properties in the Auckland region. Householders
 are likely to receive their new valuations during October this year. If
 your property rises in value by more than the average across the city,
 your rates increase will be greater than the average increase. The
 converse is also true. The property market has been strong in certain
 areas, such as the inner city suburbs, so rates will increase more than
 average in areas like Grey Lynn, Ponsonby, and Royal Oak.
 
 Keeping Your Insurer Informed
 After the earthquakes in Christchurch, and various other natural
 disasters, the value of having adequate insurance is well recognised.
 Insurance companies have become tougher ensuring the conditions of their
 policies are being adhered to. If they are not, householders may find
 that, in the worse situation, they are not covered. To be on the safe
 side, it is best to keep your insurer informed if your circumstances
 have changed. For example, if you are planning to let your property for
 a short period (such as during the rugby world cup) or doing a house
 swap, your insurance company should be advised. Similarly if you are
 transferring your house into a family trust, you must notify your
 insurance company and get the new entity noted on your policy.
 
 Gift Duty is Going
 It is now official - Gift Duty is being abolished from 1 October from
 this year.  The reason for abolishing it is quite logical.  Gift duty
 only raised $1.5 million in revenue and yet cost the Government $500,000
 to administer it. It may cost the private sector up to $70 million per
 annum in compliance costs. For those with trusts or those planning to
 form one, all the gifting can be done at once. Under the previous
 system, with gifting at $27,000 per year for a single person (or $54,000
 for a couple), gifting in some cases took many years (as well as
 incurring annual solicitor charges). We doubt if this law change will
 cause a flood of new trusts. Perversely, it will enable those who find a
 trust an unsuitable structure for their purposes, to conveniently
 rearrange their affairs and unwind their existing arrangements.

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.