How will Resimac's exit affect advisers?
Mortgage advisers in New Zealand are reeling after Resimac, a major non-bank lender, announced it would be stopping all new home loan applications in the country from July 1.
The move, which came as a surprise to many, was announced yesterday after the non-bank lender said it had undertaken a “comprehensive review” of the New Zealand mortgage market.
The review determined that the “competitive environment will remain restrictive for non-banks for the foreseeable future”.
It has left advisers scrambling to find alternative solutions for their clients.
Advisers ‘shocked’ and ‘bitterly disappointed’
"Shocked" is how Satyan Mehra (pictured above left), owner of iConsult Finance, described the news.
“It’s caught everyone by surprise,” said Mehra, who was named the joint winner of the Avanti Finance Adviser of the Year – Specialist Lending at the 2024 NZ Mortgage Awards.
“Resimac is one the best, most well-known non-bank lenders in the market and the closest to the banks. They have a range of brilliant products to help clients and a massive book.”
Jeff Royle (pictured above right), a mortgage adviser at iLender, echoed Mehra's sentiment.
Royle, known as "Mr. Resimac" among his colleagues for his support of the lender, expressed "bitter disappointment" about the lack of warning.
“I’ve been supporting them from day dot, and I’ve had dozens of phone calls from other advisers and people in the industry about the news,” Royle said.
Resimac departure leaves hole in the non-bank market
The departure of a major player like Resimac leaves a significant gap in the non-bank mortgage market. As advisers pointed out, Resimac offered unique products and competitive rates that are difficult to replicate elsewhere.
"People can say there are other lenders," Royle said, "but actually there aren't." Resimac's products, particularly those catering to overseas investors and bundled financing options, were unmatched, according to Royle.
“For clients not living in New Zealand but buying investment properties here, Resimac stood head and shoulders above the rest in that space,” Royle said.
“Furthermore, if you owned an owner-occupied property and you wanted to leverage off that and buy a rental property, Resimac could go to 80% LVR on both properties. Other lenders would only go 80% on your owner-occupied and up to 65% on the rental.”
Mehra agreed, saying Resimac’s products had been “market-leading”.
“No other lender had any other products like them,” Mehra said.
“Resimac was providing competitive products across fixed rates, floating rates, specialist rates and alt-doc among others and there’s certainly going to be an initial difficulty finding alternative providers.
“There’s now a massive player out of the market, which means there’s less options.”
In terms of like-for-like products, Royle said in terms of low-doc, alt-doc, or self-employed lending, the nearest competitor is 1% to 1.5% more expensive.
“Pop that into a servicing calculator and imagine the effect it has.,” Royle said. “By them exiting, unless other product providers come up and fill the gap, we have lost two of the best products in non-banks.”
How will Resimac’s home loan exit affect advisers and their clients?
The immediate impact of Resimac's exit on existing applications remains unclear.
Resimac has confirmed it will continue to service its existing New Zealand customers and any customers in the application pipeline.
While Royle expressed confidence that settlements scheduled for next week will proceed, there are concerns about what exactly is considered within or outside of the application pipeline.
"We've got eight applications currently in process, some unconditional. Are they going to decline them?" Royle said.
For Mehra, the worry lies in potential client anxiety.
While he believes there might not be a direct impact, client calls have already expressed concern. "People don't fully understand non-bank lenders," Mehra said, fearing this news could be seen as a sign of instability within the sector.
He added that some of his clients with existing Resimac loans might experience "nervousness and uncertainty" about the future.
What’s the future for non-banks in New Zealand?
The future of non-bank lenders in New Zealand is shrouded in uncertainty following Resimac's departure.
Royle fears the news could potentially "undermining the non-bank space" and set the industry back "ten years."
A decade ago, if you were recommending a non-bank to a consumer here you had to go through a whole spiel about they're not dodgy because people had never heard of them. “We got the question, what happens if they go bust?” Royle said.
“In reality, not a lot would happen because under New Zealand law, the receiver takes over the book and they can’t jack up the interest rate or anything like that. But I haven’t had that conversation in years.”
Mehra shared Royle's concerns, worried that Resimac's exit might spook potential borrowers. "They might be thinking, 'if Resimac can go, what about the smaller lenders?'" he said.
Mehra, a vocal advocate for the New Zealand non-bank sector, is understandably shaken.
“It’s upsetting because I’ve frequently talked about how stable and good non-banks are,” he said.
“Resimac is one of the biggest names in this space and honestly, they’ve been an absolute breeze to deal with. I’ve come with all sorts of client situations, and they’ve been just so good.
“But now it makes you wonder, if a business like that can fold so quickly, what’s the future of the non-bank market in New Zealand?”
Despite these concerns, Royle said when push comes to shove, consumers will still utilise the non-bank sector because of its place in the lending market.
“The thing to remember is people’s needs are greater than their fear,” Royle said. “People normally come to non-banks because they can’t go mainstream.”
