Low deposit cap could open up market, says Aussie lender

Photo / Janna Dixon

The boss of an Australian non-bank mortgage lender says the pending cap on low deposit bank lending could be a catalyst for opening up the market to non-bank lenders.

Peter Wood, general manager at Bluestone Group, said his firm was considering re-entering the New Zealand market before the Reserve Bank's announcement that new bank lending to borrowers with less than 20 per cent equity must be capped at 10 per cent from October 1.

"We have just relaunched into the Australian market in the last four to five weeks, obviously a natural extension to that is the New Zealand market. New Zealand has always been on the radar but timing is everything."

Wood said the cap for banks, which does not apply to non-banks, was not a reason to enter the market but made it more attractive.

"From one side of the fence yes it is more attractive - there is a gap that has opened up."

But it could also be riskier as losses more often occurred from lending to low equity borrowers, he said.

"We have to have a view in terms of balancing that out."

Wood said New Zealand had always been a difficult market for non-bank lenders because the major banks had the lion's share of the market with around 95 per cent of all lending.

In Australia non-banks have accounted for up to 20 per cent of lending.

"We've never been able to penetrate the market in New Zealand, this might be a catalyst for non-banks."

Bluestone stopped mortgage lending in New Zealand in 2008 after capital markets froze up and its funders Barclays Bank and Westpac decided to pull out.

The business is now backed by Macquarie in Australia which also owns a share of it.

Wood said he would closely monitor the impact of the changes but it would be at least six to 12 months before Bluestone would be ready to enter New Zealand.

It would not be the first Australian non-bank lender to cross the Ditch.

Resimac entered the New Zealand market in November last year after a three-month trial.

Adrienne Church, the company's general manager of mortgages in New Zealand, said Resimac had already seen an increase in its business as a result of mainstream banks pulling away from low deposit lending.

"There are a lot of quality borrowers who won't have the required 20 per cent deposit who will continue and deserve options to mainstream lending."

Church said the Reserve Bank changes created an opportunity but it was hard to gauge how big it would be.

"We believe the mainstream banks are already developing creative products to enable these borrowers to continue to borrow, so how long or how large the opportunity is there we will have to see."