Updates advisers on growing product range
Hamilton-based lender Basecorp Finance has issued an update to mortgage advisers, highlighting recent activities and market observations in the wake of turbulent economic conditions.
Chief Financial Officer John Moody shared insights on the company's progress and the broader market sentiment as New Zealand anticipates potential cuts to the Official Cash Rate (OCR) in 2024.
“As we see increasing market confidence of OCR cuts to come in 2024, we thought it timely to provide a short update to mortgage advisers on what we have been doing here at Basecorp over the last few months,” Moody said.
While it remains a difficult economic environment, Moody said the company is encouraged by the recent improvement to sentiment and overall pick-up in property market activity.
“We are also excited by the recent changes to our product range across both short and long-term lending and look forward to working with advisers as we head into the next stage of the property market cycle.”
What is Basecorp seeing?
Sentiment slowly improving
Overall sentiment continues to improve despite a difficult economic environment, as forecast cuts to the OCR become widespread and bank fixed rates decline.
Basecorp noted that property market metrics overall displayed a good level of improvement.
For example, days to sell have fallen from 50 (Jan-24) to 47 (Jun-24) while REINZ volumes are moderately up from levels in 2023 (5,396 average per month YTD).
“We are seeing an increased level of enquiry and settlements at Basecorp. Inflation should be within the 3% band by end of year,” Moody said.
Regulation
From the CCCFA to the Bright-line test, the New Zealand mortgage industry has been going through a multitude of regulatory changes.
Basecorp said the reinstatement of interest deductibility, the progressive rollback of the consumer credit legislation and in particular the recent removal of affordability provisions, plus tax cuts should be seen as net-positive for the market.
This is despite debt-to-income ratios (DTIs) being likely to impact the market over the longer term, according to the lender.
Non-bank volumes
Overall non-bank market volumes remain off 2023 lows, but subdued.
While system growth overall remains negative, Baecorp said the OCR cuts in the nearer term (in 2024) should assist with restoration of positive growth.
Short-term originations
Basecorp said there is “strong demand” from property trading and short-term investment lending, as borrower positioning for the next property market cycle begins to occur.
What has Basecorp been doing?
With so much change in the market, Basecorp has sought to remain at the forefront by launching new and innovative products, such as the lender’s new commercial mortgage product.
Moody said the product’s interest rates were “broadly in line” with its own residential investment rates, and the offering “will sit competitively with bank floating commercial rates”.
“Maximum LVR is 60% plus fees, which we think is a very competitive proposition for the asset class particularly when combined with 20-year terms with no ongoing covenants or reviews,” said Moody.
Basecorp has also increased funding for long-term land funding up to 50% LVR, including interest only periods.
And in terms of short-term lending, Basecorp’s commercial property security is now available. There is also new bridging product availability, with increased owner occupier flexibility.
Increased flexibility, growth and funding
In response to the relaxation of CCCFA affordability regulations, Basecorp has enhanced flexibility for regulated deals and reduced pricing across both short- and long-term products by 20-30 basis points.
“We see further reductions occurring, in line with the OCR track over the next one to two years,” Basecorp said.
The company has expanded its short-term lending options, now offering commercial property security and a new bridging product with increased flexibility for owner-occupiers. This aligns with Basecorp's focus on maintaining liquidity and responsiveness, boasting turnaround times of 24 hours.
All of this is backed by the company’s strong financial position, with funding availability currently over $100 million.
