As rates drop, Basecorp is expanding its product range and securing fresh funding to fuel growth
This article was produced in partnership with Basecorp Finance
Basecorp Finance sees the prospect of falling interest rates as fuelling demand for alternative lending solutions and is expanding its product offerings while securing additional funding to meet the evolving needs of mortgage advisers and their clients.
The Hamilton-based non-bank has been quietly preparing for this moment by broadening its portfolio, and introducing new products tailored to fill gaps in the market.
"We've spent time over the last few years talking to advisers about what products they'd like to see in the marketplace from us," said Craig Rolls, head of lending at Basecorp. "One was a way to more efficiently fund commercial property. And another was more bridging options, at a time when bank appetite had decreased markedly in this space."
Diversifying to meet demand
The company's new commercial property loan targets 'small ticket' properties, with loan-to-value ratios (LVRs) of up to 55%. Rolls noted that this product offers "genuine 'set and forget' long-term lending of up to 20 years with no ongoing covenants to meet or annual reviews."
This approach addresses a common pain point for commercial property investors who often face stringent ongoing requirements from traditional lenders. By offering a more hands-off approach, Basecorp is tapping into a segment of the market that values simplicity and long-term stability.
For homeowners seeking bridging finance, Basecorp now offers solutions with LVRs up to 70%, including both 'closed' and 'open-ended' options. This product aims to fill a gap left by traditional banks, which have become more conservative in their lending practices.
"We expect to see further demand for the product as the market picks up and buyers' timeframes for purchases narrow," Rolls explained. Even as affordability remains a key hurdle for home buyers with test rates still high, more people are likely to view falling rates as a motivator to try to buy sooner with a smaller deposit rather than delay purchasing to save more, especially as the cost of living continues to squeeze. In such an environment, speed and flexibility – a hallmark of non-bank transactions – are becoming increasingly important.
Funding for the future
To support its expanded product range and anticipated growth, Basecorp has secured additional funding. "We're really excited to have recently announced an upsized short-term programme with a key funding partner of $50m, with appetite to upscale further to $100m as our exposure grows," said John Moody, chief financial officer at the firm.
This new funding has allowed Basecorp to significantly reduce its interest rates across both short-term and long-term products. Long-term rates now start from 8.85%, while short-term rates begin at 9.95%. Moody is optimistic about further reductions, stating, "We look forward to reducing these further as future anticipated cuts to the OCR occur."
The ability to offer competitive rates is key in the non-bank lending space, where higher interest rates have historically been a barrier for some borrowers. By bringing its rates down and closer to those offered by traditional banks, Basecorp is positioning itself as a viable alternative for a broader range of clients.
Growth targets and market positioning
With its expanded product range and competitive pricing, Basecorp has set ambitious growth targets. "We see targets of $2bn of receivables as achievable in the medium-term," said Moody.
However, he is aware of the importance of responsible growth.
"We intend to do this responsibly -- we've seen players in the market come and go after offering unsustainable pricing levels or specials, and we think these sorts of approaches (and exits) do the reputation of our non-bank industry overall no favours."
This cautious approach to growth reflects Basecorp's long-term vision and commitment to stability in the non-bank lending sector. By avoiding the temptation to chase rapid growth through unsustainable practices, the company aims to build trust with both advisers and borrowers.
Basecorp's strategy appears to be paying off. Moody reports that the company has tracked well against its peers in terms of market share, despite the overall shrinkage of the non-bank market due to higher floating rates across the industry.
"It's clearly been a challenging period for the non-bank industry, and we think overall, we've come through this period in a solid position -- with good levels of capital and debt availability to continue to make consistent credit decisions, a fantastic group of experienced people within our business, and strong support from our stakeholders and advisers," Moody stated.
Balancing technology and relationships
While Basecorp remains committed to its relationship-focused approach, the company is cautiously exploring how technology and AI might enhance its operations. "We'll continue to look at whether both developments in technology and AI can assist with how we market and approve our product offerings to advisers in a more efficient manner," Moody said. "However, we intend to explore this carefully."
This measured approach to technology adoption reflects Basecorp's understanding that in the lending industry, personal relationships and human judgment remain invaluable. The company seeks to strike a balance between leveraging technological advancements and maintaining the personal touch.
As Basecorp continues to diversify its offerings, it aims to become a comprehensive solution for advisers' non-bank lending needs. "We continue to think advisers are best placed to grow their business and see our role as facilitating solutions when bank funding options are unavailable," Moody explains.
This adviser-centric approach is central to Basecorp's strategy. By positioning itself as a partner to advisers rather than a competitor, the company aims to build lasting relationships that drive mutual growth.
Moody elaborated on this strategy: "Our focus has been on diversifying our product offerings so that we can be seen as a one-stop shop for an adviser's non-bank needs, helping promote and inform advisers on non-bank options in the marketplace to best suit their clients' circumstances."
This approach extends to educating advisers about the non-bank lending sector in general and the opportunities it presents for their clients. By doing so, the company aims to develop the wider non-bank lending market in New Zealand.
Moody acknowledges that competition is fierce with a number of “very strong” non-banks in the market.
“We understand advisers have options… for us, we think our product diversification, adviser-centric approach and relationship focus will hold us in good stead as the market continues to evolve and asset growth resumes.”
Weathering continuing economic challenges
Basecorp's expansion comes at a time when the broader economic environment remains uncertain. However, the company sees opportunity in this uncertainty. "We've been very focused on both flexibility and consistency through this period -- across our products, in our decisioning, and in our relationships. We think they're factors that have resonated with advisers, in a period where the wider environment has been particularly choppy," Moody noted.
This focus on consistency and flexibility has allowed Basecorp to maintain its position in the market even as other lenders have struggled. By providing reliable service and adapting to changing market conditions, the company has built a reputation as a steady hand in turbulent times.
As Basecorp looks to the future, it sees significant potential for growth in the non-bank lending sector. With its expanded product range, competitive rates, and strong relationships with advisers, the company is well-positioned to capitalize on opportunities as they arise.
"Ultimately, the success of mortgage advisers is integral to our own growth given we source 95% plus of our loans through this channel, and so we will continue to be an advocate and voice for the use of mortgage advice here in New Zealand," he said.
Basecorp Finance is a non-bank mortgage lender, operating since 1997 and headquartered in Hamilton, New Zealand. Basecorp has a loan book of more than NZ$1bn and is one of the leading nonbanks owned and operating in New Zealand. It has developed a broad range of short and long-term mortgage products to meet the needs of advisers, across both residential and commercial property. It has a highly experienced team of 15 with a proven track record of managing credit risk through many economic cycles. Basecorp originates over 95% of loans through adviser channels.
