Issue 2016 / 19 28 October 2016
Welcome to the nineteenth 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 28 October 2016) the money markets were at the following levels:
Official cash rate 2.00% (unchanged)
90 day bill rate 2.14 (down from 2.18)
1 year swap rate 2.09 (down from 2.11)
3 year swap rate 2.23 (up from 2.11)
10 year bond rate 2.69 (up from 2.51)
NZ/US dollar 0.7122 (down from 0.7160)
Change in the Market
We have noticed a general tightening of the trading banks residential mortgage lending criteria. They are declining more applications and second tier lenders, such as us, are receiving more. The lending restrictions include requiring investors to have a 40% deposit and making it harder for first home buyers to borrow more than 80% of the property’s value. The difficulty in raising finance will slow the market down, particularly in the short term. These measures do nothing to reduce the impact of offshore buyers who may be able to borrow from their own local banks or have cash to invest. Local New Zealanders are the most likely group to be penalised by these restrictions.
Looking for Funds
Over the past month we have been busy lending. As a result we are looking for retail deposits. Our flagship rate is 5.50% for two years and 5.75% for three years. Interest can be paid either quarterly or monthly (for deposits over $10,000). Our rates are competitive compared with bank offerings that are typically in the range of 1 to 3%. General Finance’s interest rates are attractive. Our minimum deposit is $5,000.
Interest Rate Cut Likely
Next month the Reserve Bank will review the Official Cash Rate. The consensus is that they will almost certainly cut the OCR from 2.00% to 1.75%. It will have little effect on interest rates. Banks are now increasingly funding offshore and the costs in this area have been rising. On the other side, they need to retain their existing deposits and add to them. Those with floating rate mortgages will see no further cuts in rates and the current deposit rates will remain where they are.
Insurance
Those buying older homes (built before 1940) need to be aware that obtaining general property insurance is becoming progressively harder. Insurers are asking more questions and one in particular is the condition of the electrical wiring. An electrician’s certificate is often required. Gone are the days when you can obtain your household insurance on the day of settlement. If you are having trouble obtaining insurance on your house due to the condition of the electrical wiring, you may wish to ask the vendor who their insurer is - at least their insurer will know something about the property.
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.