Non-banks unite: Industry reacts to Resimac exit

Resimac's recent decision to exit the New Zealand home loan market has shaken the non-bank lending sector.

In an exclusive interview with NZ Adviser, industry leaders from Liberty Financial, Avanti Finance, Pepper Money New Zealand, and Basecorp Finance reacted to the news and highlighted their own commitment to the market despite turbulent conditions.

‘Surprising’ and ‘disappointing’: Impact of Resimac's exit

On June 20 this year, Resimac announced it would cease accepting new home loan applications in New Zealand from July 1.

The move, which came as a surprise to many advisers, came after the non-bank lender said it had undertaken a “comprehensive review” of the New Zealand mortgage market.

This was followed by the resignation of CEO Scott McWilliam – who had been with the non-bank for 21 years – on July 9.

While they may be competitors, the general sentiment among non-banks is that Resimac's departure was a negative development for borrowers and non-banks alike.

“The non-bank sector in NZ is really important for adviser and consumer choice,” said Aaron Skilton (pictured above, far left), CEO of Liberty NZ. “We’ve seen so many times over the years how non-banks are the centre of innovation, competition and differentiated borrower solutions.

“Through that lens, seeing any non-bank leave the market is obviously a negative, because it highlights the challenges inherent in providing broader choice for all Kiwi borrowers.”

Basecorp’s CFO John Moody (pictured above, centre right) echoed this sentiment, saying it was disappointing to see a “key participant” in the non-bank industry “exit abruptly”.

“Resimac have been a strong advocate for the non-bank sector,” said Moody. “As they exit, it becomes important that Basecorp and others continue to make efforts through our products and actions to promote trust and confidence in the sector.”

Having launched in New Zealand in 2012, Resimac’s parent company Resimac Group has been operating from Australia since 1985.

Avanti Finance’s Ian Boyce (pictured above, centre left) said while he was surprised by the news, over time “we’ve seen competitors from Australia come and go”.

“… It reflects the dynamic nature of the market, where competitors may adjust their strategies based on current business priorities,” Boyce said.

Pepper Money New Zealand’s country head Campbell Smith (pictured above, far right) also weighed in.

Smith said the “vibrancy and competitiveness” of New Zealand’s mortgage market “hinge on the ongoing support of non-banks”.

“The future we envision is one where advisers continue to benefit from a range of competitive lending solutions that can meet the diverse needs of Kiwi borrowers," he said.

How non-banks will manage the ‘restrictive’ competitive environment

Citing one reason for the exit, Resimac’s review had found the competitive environment will remain “restrictive for non-banks for the foreseeable future”.

New Zealanders are experiencing sustained high interest rates, increased mortgage arrears, and savings are running dry.

With a cash rate at 5.50% and the majority of long-term products in the non-bank industry being floating, Moody admitted the environment “remains a difficult one”.

“And until we see actual rate cuts from the RBNZ, we think overall origination volumes will remain moderate and arrears above historical norms,” he said.

Boyce agreed, saying the current economic environment is tough for everyone, including non-banks.

“We’ve seen increased competitive pressure from the banks as they’ve been more active in the non-bank space,” Boyce said.

That said, both Boyce and Moody were adamant their respective companies can make it through the challenging conditions, encouraged by recent trends in 2024.

“We’re confident in our ability to navigate the current cycle, drawing on our 35-year history of resilience in the New Zealand market,” Boyce said.

Pointing to Basecorp’s recent results, Moody said the non-bank’s overall loan book is up slightly on 2023 levels and arrears had held up well.  

“Long-term volumes have increased year-on-year, and we’ve seen strong appetite for our short-term product.”

According to Moody, long-term adviser feedback has been positive on Basecorp’s new commercial product, while the recent debt-to-income (DTI) reforms and other bank capital changes “should assist the future non-bank proposition overall”.

“It’s very easy to view the economy and overall environment negatively, but we think there are growing reasons to be positive as [we] head into the second half of 2024,” Moody said.

“And as the market begins to anticipate rate cuts, whether later in 2024 or in 2025, we think activity and volumes should only strengthen further. It’s our view that we’re through the worst.”

Liberty shares a similar outlook.

“We all operate in a competitive environment, it’s the nature of business,” said Skilton.

“While we acknowledge the environmental headwinds, Liberty believes in the non-bank market, the benefit of a differentiated business model and the value it can bring NZ consumers.”

Why advisers should continue to believe in non-banks

While all signs point to better times ahead, according to the non-bank leaders, the question remains how they are going to each get to greener pastures and seize future opportunities.

As Moody said, “advisers are looking for certainty” – especially during uncertain times.

Liberty’s plans

In terms of Liberty’s future plans, Skilton said the non-bank has been built with sustainability over the long term as a core focus.

“We have always worked to provide greater choice and flexibility for customers underserved by mainstream lenders,” Skilton said. “We will continue to support advisers with solutions that provide differentiated outcomes for customers.”

Liberty pointed to its record of being an active participant in New Zealand for over 20 years, which “continues to grow”.

“Despite market challenges, we saw record settlement levels in recent months,” Skilton said. “We also updated our core offering to better meet the needs of consumers.”

Further, Liberty has expanded its team to better support advisers and have welcomed two new BDMs in recent months.

Liberty is also the only licensed non-bank deposit-taker with an investment grade credit rating that offers CCCFA lending.

“This credit rating was recently lifted to BBB, demonstrating our financial strength,” Skilton said.

Avanti Finance’s plans

Boyce said that Avanti had “recently reset” its strategy to focus on growth opportunities, “reaffirming our commitment to delivering tailored solutions and exceptional service for New Zealanders”.

“We’re excited about the future and look forward to continuing our partnership with our valued adviser network for years to come,” Boyce said. “In any market there are opportunities and we’re focused on taking advantage of those.

“We’ll continue to invest in enhancing the experience for customers and advisers, and leveraging growth opportunities as they emerge.”

Basecorp’s plans

Basecorp is staying positive about its future plans, with Moody highlighting several factors that position the company for success.

“We think our multi-product strategy, across short and long-term lending, has served us well through the last few years, and it’s been great to broaden this further through our commercial property mortgage product,” Moody said.

Moody also pointed to the non-bank’s expanded bridging offering, which, according to Moody, is “another area where we’ve seen the banks increasingly reluctant to assist”.

“And recent tweaks to our pricing for our core long-term product, borne out of the stability of bank bill rates over the last 12 months, have assisted with new business volumes.”

Ultimately though, Moody said Basecorp’s emphasis comes back to providing advisers with certainty.

“And so, concepts like strong levels of funding availability, a growing capital base to lend on nearly all types of property, easily understood lending products, and our experienced and familiar lending team led by Craig Rolls remains key for our business,” he said.

“Plus, at a time when we’ve seen both bank and non-bank lending policies contract, we’ve expanded.”

Basecorp said it has also been careful to ensure we maintain a sufficient level of facility headroom through this more subdued period, to accommodate growth as the market begins to turn upward.

“Currently we have in excess of $150m funds available coupled with a growing capital base, and so advisers know they’ll get consistent credit appetite time and time again when dealing with us,” Moody said.

Non-banks’ message to NZ advisers

Overall, the non-bank lenders all expressed a positive outlook for the future and a desire to continue working closely with advisers. Furthermore, they see opportunities for growth as the market recovers.

In the wake of the Resimac exit, Liberty made it a point to welcome competition and the growth of a non-bank sector that offers more choice to customers.

Skilton said advisers can be assured that there are flexible non-bank options for customers that don’t fit traditional lenders.

“As strong advocates of the adviser channel, we have always worked hard to deliver flexible solutions to customers’ changing needs,” said Skitlon.

“Liberty is here for the long term and our offering is only set to grow as we continue to look for more ways to help Kiwis.”

Avanti Finance pointed to its continued experience in the market as reason why advisers should believe.

“We are one of New Zealand’s largest non-bank lenders, we’re proudly locally owned and have been operating for 35 years,” Boyce said. “We have a great range of lending solutions, and our experienced team is dedicated to collaborating closely with advisers to find the best solution for their clients.”

Basecorp said it would continue to develop long-term relationships with advisers and growing the business and the overall non-bank segment.

“We think this idea of relationship building, coupled with a real focus on sharp turnarounds and service, has resonated with advisers,” Moody said.

“Overall though, we’re very appreciative of the support advisers show our business, and believe Basecorp is well positioned to continue to reciprocate that support in the coming years.”