Issue 2012 / 19   26 October 2012 

Welcome to the nineteenth fortnightly General Finance Mortgage Commentary for 2012.  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 26 October 2012) the money markets were at the following levels:
Official cash rate    2.50% (unchanged)
90 day bill rate       2.65 (down from 2.67)
1 year swap rate    2.57 (down from 2.58)
3 year swap rate    2.82 (up from 2.79)
10 year bond rate   3.60 (up from 3.52)
Kiwi dollar         0.8190 (up from 0.8175) 

Interest Rates
The Reserve Bank yesterday, under the new Governor Mr Graeme Wheeler, kept the Official Cash Rate unchanged at 2.50%. The Governor noted that the economy remains fragile but sentiment has improved a little, compared with earlier this year. Inflation now is officially under 1.0% at 0.8%.The high dollar is causing concern among a number of our exporting businesses. We believe the OCR should be cut, as inflation is no longer an issue and our exporters need all the relief they can get from the high New Zealand dollar. It is interesting that the Australian Reserve Bank is thinking of making further cuts over the next few months to their OCR. We should follow suit. 

Leaky Homes
For over fifteen years there has been the leaky building issue. Many people who have bought modern or brand new houses have found, to their detriment, that their home have a weather tightness issue. This has exacted a heavy toll on a number of people, both emotionally and financially.  Homeowners have had to borrow extra to repair them, been unable to sell or had to accept a lower sale price. The issue is: who is at fault over this debacle? Earlier this month our Supreme Court, in a case involving the Spencer on Bryon development on Auckland’s North Shore, held that the local council was at fault.  This is rational, as they are the ones who issue the building consents and the codes of compliance.  The downside of all this, is that everyone will ultimately pay through higher rates.   

Lending to a Company
Some people may hold an investment property through a company, rather than in their own names or through a trust. It makes no difference to us. For the borrower, there may be a little bit more paper work involved.  If it is an established company, accounts may be required. At settlement, depending upon the company’s constitution, all directors or at least some may be required to sign the mortgage documents.  There are increasingly more companies that just have one director.  It is up to you to choose the appropriate business structure. We are happy to lend to individuals, trusts and companies.

Bridging Finance
We are pleased we are receiving more enquiries for bridging finance. The big difference between what we are offering and the banks, is that we do not require a guaranteed takeout. We know that the takeout will be the sale of the property, and if the vendor is given some time to do this, often a better price is achieved. Finding the perfect property in the month between sale and settlement is difficult.  With bridging finance, people can purchase the property they want, without having sold. Selling without pressure should allow a better price to be achieved. This strategy should offset the extra interest charges you have to pay when using bridging finance. 

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.