General Finance Mortgage Commentary

Issue 2013 / 11   5 July 2013

Welcome to the eleventh fortnightly General Finance Mortgage Commentary for 2013.  We aim to keep you informed on developments at General Finance Home Loans and the mortgagemarket in general. 

The Money Market
This morning (9am on 5 July 2013) the money markets were at the following levels:
Official cash rate    2.50% (unchanged)
90 day bill rate       2.65 (up from 2.63)
1 year swap rate    2.85 (up from 2.80)
3 year swap rate    3.55 (up from 3.43)
10 year bond rate   4.25 (up from 3.79)
NZ/US dollar      0.7780 (up from 0.7750) 

Borrowing Entities
For a reasonable number of the lending applications that we receive, clients are using corporate entities, such as companies or trusts, to borrow the funds. This is acceptable. Our advice is to let us know in advance if you are using a corporate entity and secondly to have that entity formed. Some leave formation to the last moment and this may hold up the transaction. Our comment is to plan ahead and think about what type of entity you will use and seek the relevant accounting and/or legal advice. Although corporate entities are popular, most borrowers are still either a single individual or couples. 

Role of a Corporate Trustee
The majority of family trusts that we see have two family members as trustees and frequently a professional trustee, often a solicitor or an accountant. You can also have a corporate trustee - that is a company.  Sometimes your professional trustee may have a company that acts as the trustee. Family members can use a corporate trustee as well.  Again, you need to seek the appropriate advice.  For a straight forward family trust that owns a family home, individuals are probably fine.  However, if the trust is likely to be complex, holding a variety of investments, then a corporate entity may be more suitable.

Debt Consolidation
Part of our lending is for debt consolidation. Often these borrowers have been working through a project, such as building or altering a property, and have funded this from a variety of short term sources including credit cards and vehicle loans. These loan over a period of time, with their principal component, become cumbersome.  It makes sense to consolidate them into one loan, where there is one monthly payment. Our loans are interest only, which helps, and in certain cases, we can look at part capitalisation of the interest.

Deposit Rates
Those with funds to invest may wish to consider us at General Finance.  Our rates are often 50% above prevailing bank rates for a similar term. Our current two year rate is 6.25%. We pay our investors, either quarterly (most popular) or for amounts over $10,000, we can pay monthly. This option is particularly attractive for retired people who like a more frequent payment.

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.