Approached to sell loan book
Specialist non-bank mortgage lender Bluestone Home Loans has made the decision to exit the New Zealand market and will stop accepting new home loan applications from August 30, 2024.
Following a strategic review, the company concluded that the NZ market is “well serviced” and the “opportunity and product/market fit for us is small”.
“As a result, we will be exiting our NZ business,” said Mark Jones (pictured above), chief executive officer at Bluestone Home Loans.
Small NZ market well-served by lenders
Bluestone, which primarily deals with near-prime, credit impaired, and self-employed customers, was established in Australia in 2000 before expanding to New Zealand between 2002 and 2008.
After a 10-year absence in the NZ market, it returned in 2018.
Speaking exclusively to NZ Adviser, Jones said that while its Australian business is growing quickly, the business opportunity in New Zealand didn’t stack up.
“The NZ market is only about $5 billion, which is just a lot smaller than Australia. If we got to 20% market share, we’d have a billion-dollar book,” said Jones who only commenced his position one year ago.
“So, it’s not really of sufficient scale for us to make a meaningful difference to our business as we go forward.”
Secondly, Jones said the market in New Zealand is “well served and highly competitive”.
“Margins are actually tighter in New Zealand than Australia. So, it’s a subscale business in a size sense and the margins are tight, so we made the decision to focus on Australia.”
What does this mean for advisers and borrowers?
Because of this decision, Bluestone Home Loans, which also underwrites Select Home Loans NZ, will cease accepting new home loan applications in New Zealand from Friday August 30, 2024.
All applications not settled by October 25, 2024, will expire.
The company said it was dedicated in supporting its advisers through the transition and its BDM and support teams will continue to support them with their current deals until expiration.
“We’re trying to minimise the impact so brokers and customers who have a loan with Bluestone will get treated as if we were there,” Jones said. “Borrowers will, of course, continue to receive the same service and support from our customer teams and will be appropriately advised of any updates.”
“We’ll continue to run it down in an orderly fashion.”
Will Bluestone sell to a ‘credible third party’?
Jones said during the course of the review, Bluestone as approached by “a credible party” and are in “advanced discussions” to sell the NZ loan book.
“Inevitably, sale processes can either go fast or slow. I think the best thing I can say is we would hope to be able to announce something before we got to October 26, which is when we will stop originating loans,” Jones said.
“While a sale is our preferred approach, if a transaction cannot be completed, Bluestone will continue to service existing customers as the existing book runs-off.”
What about Bluestone’s NZ employees?
In terms of the eight Bluestone staff operating from New Zealand, Jones said the people working on originations would likely exit.
“The people involved in servicing we would continue to retain as we run down the portfolio.”
Jones said the company would work out a transition plan for some employees.
“We want to be seen as a responsible party. We will work with our employees, our customers, and our funders to make this as orderly and seamless as possible.”
Will Bluestone come back again?
Given Bluestone’s previous exit and re-entry in the NZ market, some may question whether the non-bank lender would re-enter again once the market calms down.
While there may be not much opportunity in the non-conforming segment at the moment, Jones left the door ajar for a possible re-launch.
“I’d never say never to things, but we are withdrawing for the foreseeable future.”
The decision came two months after Resimac, another non-bank lender, announced it would shut down its NZ operations for similar reasons.
