Service offering key to surviving tough market, says Basecorp Finance
This article was produced in partnership with Basecorp Finance.
Priscilla Dickinson of NZ Adviser caught up with John Moody, chief financial officer at Basecorp Finance at its new business premises in central Hamilton, to discuss how market challenges have affected the non-bank sector and the increased demand for short-term finance the business has experienced in recent months.
Rising interest rates and lower loan volumes, together with increasingly competitive behaviour from banks, have made it difficult for non-banks to compete in the larger prime lending categories, Basecorp Finance says.
But a continued focus on consistency, availability of funds and a strong service proposition has helped the non-bank lender to ride out those challenges and enjoy a recent uptick in demand for short-term lending.
Established in 1997, Basecorp Finance works closely with mortgage advisers, providing short and long-term finance solutions. Its broad-based lending policy allows it to provide short and long-term residential loans, catering to borrowers from a range of backgrounds.
Its new premises (pictured above) reflect its ongoing commitment to grow and innovate, and strategy to be a one stop shop for residential first mortgages.
Basecorp Finance chief financial officer John Moody said that its service offering, particularly its 24-hour turnaround target, had been a success point for the business.
“For us, it’s about continuing to offer the same level of consistency we have always been proud of as normality resumes: strong levels of funds availability, 24-hour turnarounds, and a relationship-based approach with advisers that prioritises a focus on ‘yes’-based solutions,” Moody said.
“And where we can’t offer a “yes”, we use our experience to point advisers to other potential solutions in the marketplace.”
He acknowledged the challenges that the non-bank sector had faced in recent months, noting that outstanding loans had fallen from $6.2 billion to a current $5.5 billion.
Non-banks challenged by market conditions
Moody said that rapid official cash rate rises and competitive pressure from bigger banking players had made it difficult for non-banks to compete in the larger prime and near-prime lending categories.
Non-banks had largely transitioned to a “much smaller lending segment” he said, with some material changes to risk appetite seen across the board.
While Basecorp Finance had not been immune to these challenges, Moody said that the business had maintained a strong service proposition across both short and long-term products, enabling it to cater for certain niches where banks had pulled back.
In short-term lending, those niches include property trading, bridging finance and asset lending scenarios, and in longer-term lending, they include credit impaired and offshore borrowers, more complex investors and borrowers who don’t quite fit traditional lending criteria.
“Our ability to provide flexible solutions across the two product sets has allowed us to slightly outperform the market decline and we remain optimistic as the market increasingly looks like it is entering an upswing,” Moody said.
Demand for short-term finance on the rise
Over 2022 in particular, Moody said that demand for short-term finance was quite subdued, which reflected a lack of confidence in the property market and the direction of property prices.
More recently, Basecorp Finance has seen a rise in short-term activity, indicating that market confidence is increasing. It has been encouraging to see some of the more experienced property traders back in the market, Moody said.
Moody said that increased activity had boosted demand for short-term finance solutions such as bridging finance, asset lending and property trading - areas that Basecorp Finance has strong representation in.
“There’s been a general level of confidence over the last few months that the bottom of the market has been reached and the future direction is up,” Moody said.
The solutions offered by Basecorp Finance in the short-term finance space is part of its strategy to be a “one stop shop” non-bank solution for residential first mortgages, whether it be from one month to 30 years, he said.
“Repeat borrower deals with advisers, of which we see many, can be done on a same-day basis and our experienced lending team headed by Craig Rolls and policy terms are market-leading in this space,” Moody said.
Loan book grows to $1.2 billion
In March 2022, Basecorp Finance reported its loan book had surpassed $1 billion, and Moody confirmed that figure had since grown to $1.2 billion.
Despite high inflation and rapid interest rate rises, Moody said that business performance had held up, noting that there was no question that household budgets were under stress.
“Our long-term book has been steady, with continued strong support from advisers. Most encouragingly, we’ve witnessed significant growth in our short-term book,” Moody said.
“This points to the confidence in the near-term direction of the property market from users of this product such as property traders, those seeking bridging finance, and individuals who cannot present clear evidence of income.”
Referring to a recent rise in short-term activity and more widely, a view that interest rates are at or near the peak, and properties selling in fewer days (REINZ reports median days to sell reduced by 7 days in September), Moody said that the outlook for the year ahead was positive.
Basecorp Finance recently relocated to a modern office space, located 467 Anglesea Street in Hamilton.
Moody said that the move was a significant step in the company’s journey to grow and innovate, and that he looked forward to welcoming advisers to the office.
For more information about Basecorp Finance, please visit here.
John Moody has been director and chief financial officer for Basecorp Finance for 6 years, while fellow director and head of lending Craig Rolls has been with the business for almost 25 years.
