Issue 2016 / 10      17 June 2016

Welcome to the tenth fortnightly General Finance Mortgage Commentary for 2016.  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 17 June 2016) the money markets were at the following levels:
Official cash rate    2.25% (unchanged)
90 day bill rate       2.33 (down from 2.42)
1 year swap rate    2.25 (down from 2.30)
3 year swap rate    2.29 (down from 2.30)
10 year bond rate   2.43 (down from 2.63)
NZ/US dollar      0.7053 (up from 0.6809) 

Reserve Bank Announcement
Last week the Reserve Bank did not cut the overnight cash rate.  The main reaction to this was seen through our currency appreciating against all our major trading partners.  Our currency rose from 0.44 to 0.49 against the pound. Some of this increase was due to the pound weakening,  as people in the UK  will vote next week in deciding to stay in part of Europe zone or not.  The outcome over the past few weeks looks increasingly uncertain and the polls at the moment are running neck and neck.  The final result will come down to voter turnout and the number of younger people who vote.  Younger people by and large tend to favour staying part of Europe. The higher the voter turnout, the more likelihood that the UK will stay part of Europe.  

Providing Suitable ID
When someone is depositing money with a financial institution, or taking out a mortgage, the institution will ask for proof of identity. This is part of “knowing your client”. A passport, or a drivers licence, together with proof of address such as a utility bill with your place of residence on it, will be requested.  We are noticing that, particularly amongst younger people, this last requirement is an issue.  In many cases they may be moving flats reasonably often and many pay all their bills via the internet. Similar, there are older investors who, for various reasons, may not have a passport or even a driver’s licence. We feel this whole issue of providing identity for financial transactions has gone too far and there is now a group of people who just cannot comply with it.

City Land Limits in Auckland
Back in 1993 the then councils of Auckland adopted an outer city limit, beyond which consents to build new houses would not be given. The idea was to encourage intensification and to save councils money in providing infrastructure to these outlying new suburbs.  This policy has not really worked, yet to anyone travelling around Auckland there seems to be various blocks of empty land available that could be built upon. Going beyond the city limits will relieve land pressures, both in terms of price and supply. We believe this should be done.  In the short term we just have to build some more houses.

Asset Lending
We will consider asset lending and “No doc” loans, but only to unregulated customers that are borrowing for business purposes. In most cases, these loans are being made to trusts or companies.  In many cases there is a genuine takeout, such as the sale of a property. These are essentially bridging loans funding a particular outcome. We welcome your enquiries.

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.