Issue 2017 / 5 7 April 2017
Welcome to the fifth 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 (9 am on 7 April 2017) the money markets were at the following levels:
Official cash rate 1.75% (unchanged)
90 day bill rate 2.00 (up from 1.98)
1 year swap rate 2.06 (unchanged)
3 year swap rate 2.47 (down from 2.54)
10 year bond rate 3.10 (down from 3.22)
NZ/US dollar 0.6970 (down from 0.7027)
Auckland Housing Market is Slowing
There is anecdotal evidence that the Auckland market is slowing. Auction clearance rates are down. There is still an overall shortage of properties in the greater Auckland area. The various lending restrictions imposed by the Reserve Bank are penalising first home buyers and there are fewer of them in the market. This is not by choice, but by legislation. Interest rates have bottomed and are expected to start to rise. This is already happening now and this in particular affects the investor market. The Auckland property market is expected to drift sideways for the short term.
Insurance
With the recent weather events over the past week, both here and in Australia, and the earthquakes damaging the Kaikoura and Wellington regions, it is an opportune time to review your house and contents insurance. This is particularly so if you have not reviewed it for a number of years. House replacement costs have risen steeply, in most parts of the country, as building costs have risen. Householders are continuing to add to their contents, with new furniture, and electric and electronic goods. So the total cost to replace these items is also going up. Reviewing one’s insurance should be done on a regular basis.
Mortgage Rates Across the Tasman
On Tuesday, the Governor of the Reserve Bank of Australia, reviewed the official cash rate and made no changes. Their official cash rate is 1.50% against ours of 1.75%. As a result, you would expect mortgage rates on both sides of the Tasman to be the same. They are not - the Australians enjoy a roughly half a percent cheaper floating rate at 5.25%, compared with ours at 5.80%. Our one year fixed rates are roughly the same at 4.50%, but the three year fixed rates are around one percent lower across the Tasman. Why is this? There are two reasons. There is more competition in the Australian market, with a larger non-bank or second tier market operating, unlike in this country, and economies of scale. Australia is just a much bigger market than ours and this produces cost savings.
Tax Time
The tax period for the year ended last week. A number of people will be getting ready to prepare their tax returns. Some will have provisional tax to pay. As a lender, we are comfortable in providing advances for those who have tax obligations to meet. If you have outstanding tax arrears, and the Inland Revenue is demanding payment, you may receive more favourable treatment, if you are able to meet the obligation in a single payment. We are prepared to advance either first or second mortgages to meet tax payments.
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.