Issue 2015 /4 2 April 2015

Welcome to the fourth fortnightly General Finance Mortgage Commentary for 2015. 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 2 April 2015) the money markets were at the following levels:
Official cash rate 3.50% (unchanged)
90 day bill rate 3.64 (up from 3.62)
1 year swap rate 3.57 (up from 3.56)
3 year swap rate 3.58 (up from 3.55)
10 year bond rate 3.25 (up from 3.22)
NZ/US dollar 0.7449 (up from 0.7388)

Lending to Trusts
Many potential borrowers want to borrow against property held in a trust. There is no issue with lending to trusts but the downside is that more paperwork will be required. Lenders will need certified copy of the trust deed and separate bank and mortgage statements for the trust. AML requirements may mean that ID is required for certain beneficiaries. Trustees need to aware that when the mortgage is being drawn down, all trustees must be available to sign the necessary documents or have arranged suitable powers of attorney. Finally the trust details need to be noted on the relevant insurance policy.

Issues with Vendor Finance
Occasionally we are asked about our views on vendor finance. This is where the vendor provides a certain amount of finance to assist with the sale of the property. The amount often ranges from 5 to 25% of the sale amount. This type of financing is more common in certain overseas jurisdictions. Lenders in this country do not like it because it brings into question the sale price. Currently we have a reasonably healthy property market in most regions, so why does a vendor need to provide this type of finance? Vendor finance is more acceptable in certain family situations when property is being passed from one generation to the next and the new generation requires some financial assistance.

Our Monthly Income Debentures are Popular
There are two parts to our business - our lending side and we are also a licensed non-bank deposit taker. Our current benchmark rate, which is extremely attractive, is 7.0% for three years. We offer 6.75% for 2 years. One of our special features is that we offer monthly interest payments for deposits of $ 10,000 or more. This is proving popular, particularly with those who want their income to match their monthly outgoings. If you, your associates or clients have funds to invest, then ask about our monthly income debentures.

Taxation
The annual tax year finished a few days ago. It is now time to organise your paper work to complete your returns. Some will have tax to pay or provisional tax obligations to meet. Part of our service, is that we are happy to lend, either on first or second mortgages, to meet tax obligations. Some lenders are not keen to do this type of lending, but we are happy to assist here.

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.