Issue 2017 / 9 2 June 2017
Welcome to the ninth 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 2 June 2017) the money markets were at the following levels:
Official cash rate 1.75% (unchanged)
90 day bill rate 1.96 (down from 1.99%)
1 year swap rate 2.02 (down from 2.04)
3 year swap rate 2.38 (down from 2.43)
10 year bond rate 2.73 (down from 2.82)
NZ/US dollar 0.7061 (up from 0.6901)
Reserve Bank Concerned About High Debt to Income Ratios
High debt-to-income ratios are concerning the Reserve Bank. In its May Financial Stability Report, the RBNZ noted that while New Zealand’s financial system was sound, it was still subject to housing market vulnerabilities. Tighter loan to-value ratios, for property investors, have slowed house price growth in the past eight months. But more households have taken on loans at high debt-to-income ratios. These borrowers are vulnerable to an increase in interest rates or a decline in income. The RBNZ may, at some future time, limit high debt-to-income ratio lending.
P in Houses
The problems with P contaminated dwellings are now occurring with a reasonable frequency. If you are purchasing a property, we suggest that you should get a P report. If you buy a property that has been contaminated, it can cost tens of thousands of dollars to rectify. This problem is occurring right throughout the country and across all social groupings. We believe that the problem will only get worse and that property purchasers need to be aware of this issue. Five hundred dollars spent on a P report could prove to be a good form of insurance.
An Auckland Loading?
Government workers, such as nurses, school teachers and policeman get paid a standard rate, regardless of whereabouts in New Zealand they work. We all know that it costs more to live in Auckland, as housing is more expensive than in a provincial city. We are seeing people, in these professions, reluctant to move to Auckland and a number are leaving. Over the next few years, we are going to see real shortages in these professions within the Auckland area. The solution is for a remuneration loading, if you live in Auckland. The private sector is already doing this. And it happens in other countries. Certain workers in the United Kingdom are getting paid more, if they work in London.
Asset Lends
We are still approving straight asset lends. In all cases there must be a take out. Most often it is the sales of a property. This may be an open ended bridging transaction or someone doing up a property to sell. It can involve other assets, such as selling of boats and cars. We are happy to look at either first or second mortgages in these circumstances.
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.