Issue 2015 /11       10 July 2015

Welcome to the eleventh 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 (9am on 10 July 2015) the money markets were at the following levels:
Official cash rate    3.25% (unchanged)
90 day bill rate       3.25 (down from 3.27)
1 year swap rate    2.97 (down from 3.09)
3 year swap rate    3.06 (down from 3.18)
10 year bond rate   3.44 (down from 3.69)
NZ/US dollar      0.6740 (down from 0.6898)

Trusts - Do You Still Need One?
The managing of trusts is becoming more onerous. It is also getting harder to appoint professional trustees. Part of your annual review with your trust, should be whether the trust still meets the objectives for which it was originally set up to achieve.  If the answer is “no”, then the trust should be wound up.  Until a few years ago, gift duty would have been charged, if the trust was above a certain size and was being wound up.  Gift duty has now gone, so it is easier and cheaper to wind up a trust, if it is no longer serving its original purpose. If you are thinking of this course of action, it is important that you obtain some legal advice on this important issue. 

Helping the Next Generation into a House
It is getting harder for the current generation to purchase their first home in which to live.  There are several ways to assist your children into their own home. Rather than giving a straight gift, one solution is to provide a loan.  The loan can be secured by a second mortgage over your property. This loan will protect you, if for instance the relationship of the homebuyers breaks down, whereas with a gift, it may become part of the relationship property. The advantages of a loan are that you may, or may not, charge interest on it. If house prices continue to appreciate, it may be possible for them to refinance your second mortgage into their first and you will then be repaid.  

We are Looking for Investors
As a company, we are a lender in our own right. In order to obtain our funds (which we then on-lend) we prepare a prospectus and raise the monies from the investing public. We are interested in having more investors.  Currently we are offering 6.50% for two years and 6.75% for three years. The minimum investment is $5,000 but for an investment of $10,000 or more, we are prepared to pay interest on a monthly basis. This is an attractive feature. If you would like to invest with us or to receive more information, please contact us and we will send you a copy of our prospectus and investment statement.

Debt Consolidation
We are still providing debt consolidation loans. This is where borrowers have a number of high interest rate short term loans (which may have capital repayments too). These include credit cards, store account loans, and hire purchase.  A number of these loans can be draining on an individual’s cash flow. If the borrower has reasonable equity in their property, we are happy to consolidate their loans, as either a first or second mortgage. After six to twelve months these loans can, in most cases, be refinanced to a prime rate lender.

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.