Issue 2017 / 2 24 February 2017
Welcome to the second fortnightly General Finance Mortgage Commentary for 2017. We aim to keep you informed on developments at General Finance Home Loans and the mortgage market in general.
The Money Market
This morning (10am on 24 February 2017) the money markets were at the following levels:
Official cash rate 1.75% (unchanged)
90 day bill rate 1.98 (down from 2.02)
1 year swap rate 2.09 (down from 2.10)
3 year swap rate 2.57 (down from 2.60)
10 year bond rate 3.23 (up from 3.20)
NZ/US dollar 0.7230 (up from 0.7190)
House Insurance
Whenever a natural disaster strikes, whether it is an earthquake, floods or the recent bush fires in Christchurch, there is generally substantial damage to peoples’ property. These losses are sad, but they are made worse when people do not have any insurance. House insurance is an absolute must. While it is a condition of your mortgage, it rates alongside having breakfast everyday and wearing clothes. For those on very tight budgets, it is hard to afford, but it is just too risky not to have it. The last ten years have shown just how susceptible this country is to natural disasters.
Changes to the Unit Titles Act
More changes are coming to the Unit Titles Act this year, as announced by the Minister of Building and Construction. Changes will include greater disclosure at the time of purchase, stronger governance and ensuring property maintenance plans are in place. The reason for this is due to larger numbers of apartments being built, and the increase in multi-owner types of accommodation that is becoming available. We expect that changes to this Act will be ongoing. We see the rules tightening to allow body corporate to charge penalties for those who do not pay, or are slow in paying their body corporate fees.
Rates Rises
Over the past decade we have seen numerous price decreases (or more features for the same price) on a number of items including whiteware, brownware, electronic goods, overseas travel and lower prices for smaller items at places such as the Warehouse. One area that has not got more competitive over time, or may have become less efficient, is the local regional and city councils. Their rates bills just increase year on year. It has reached a point where for many low income or retired homeowners, it is now one of their major expenses. Over the years, due to council amalgamations and so called economies of scale, rates should in fact be going down, not up. Voters need to insist on lower rate increases and push much harder for efficiency gains. They are occurring in most other industries.
Simple Seconds
Over the past few months we have been receiving more enquiries for second mortgages. We are happy to do them. The ones we like, we refer to as simple seconds. They are those, that on first glance, look good. Our maximum LVR is 65%. The seconds we are doing all involve a project – such as someone wanting extra funds to do up a property to sell, or a business venture such as fulfilling an export order or purchasing a franchise. In most cases they have a first mortgage, with their prime lender, who is not prepared to advance them any more funds, or where the client does not wish to disturb their first mortgage arrangements. Our maximum exposure for a second mortgage is up to around $200,000. There is a demand for second mortgages, but few participants in the market offer them.
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.