General Finance Mortgage Commentary

Issue 2013 / 18   11 October 2013

Welcome to the eighteenth fortnightly General Finance Mortgage Commentary for 2013.  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 11 October 2013) 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    2.96 (up from 2.93)
3 year swap rate    3.94 (up from 3.86)
10 year bond rate   4.70 (up from 4.62)
NZ/US dollar      0.8259 (up from 0.8246) 

LVR Ratios
Those wanting to borrow in the 80-95% range, to purchase a property, now face lending restrictions.  This is a harsh rule as it affects mainly first home buyers, who in many cases, have long working lives ahead of them and may also have young families.  This is the very group we should be encouraging into home ownership.  There are other groups affected as well. As many first home buyers buy brand new properties, this may lead to a slowdown in the construction industry. This in turn may lead to the layoffs of builders, earth movers, electricians and so forth.  Considering the construction industry is a large employer, capping loan to value ratios may lead to secondary effects and actually lead to the slowdown in the economy and hence rising unemployment. This does not appear to be a well thought out policy. 

Graves Everywhere?
There is a review underway of the Burial and Cremation Act.  These may alter the restrictions on allowing graves on private property.  Does this mean there may be graves on street corners?  What happens if you sell the property - do the new owners need to maintain them? Who will record where they are? Most cemeteries keep detailed records on who are buried there. This review raises many questions. Presumably strict controls will apply to private grave sites.  The Law Commission is currently engaged in a process of public consultation.

Wealth across the Country
Various commentators have been talking about the rising income and wealth inequalities across the country and how this might be corrected - principally through taxation. We think that this impossible, as one of the drivers of this has been rising house prices, particularly in Auckland.  A family may have three to five times the net worth of someone else, merely because they live in Auckland. For example, a fairly standard house in Auckland may be worth close to a million dollars, whereas a similar house in Dunedin is worth $250,000 and say in Marton, a provincial town in the lower North Island, it is worth just under $200,000.  Issues such as these are simply impossible to address. If anything, this difference is expected to continue growing.

Low Doc Lending
We currently have funds to lend. The transactions that we are happy to look at include bridging, low doc, and assets lend type deals. Generally, if the property concerned is in reasonable condition and the owner has some equity (at least 30% depending on location) then we can lend against it. We also lend to assist people in paying their taxes. We welcome your enquiries.

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.