Non-bank lender – Resimac – closes its doors. Is it the first to fall?

Resimac has closed its doors to new customers in New Zealand. This is a big deal. They are one of the largest non-bank lenders in New Zealand

But, from the 1st of July 2024, they are no longer accepting new mortgage applications.

The news came as a complete surprise to the mortgage industry ... and even some of the staff at Resimac offices.

So, what happened? What does it mean for Resimac customers? And what does it mean for property investors and the wider industry?

In this article, you’ll learn why Resimac called it quits and what it means for the wider market in New Zealand.

Who is Resimac?

Resimac is one of the largest and most well-known non-bank lenders.

Non-bank lenders often lend money to people in unique circumstances.

For instance, if you have just started a new business, most banks won’t give you a mortgage. They need 2 years of financial statements.

But a non-bank lender might lend you money.

Resimac is larger in Australia, and it moved into the NZ market in 2012.

How much of a big deal is this?

Resimac closing the doors to new customers is a big deal.

They were about as close to a bank as a non-bank lender can be.

If you can get a 6.8% interest rate from a main bank. Resimac might charge 7.5%. That’s 0.7% more.

Now that Resimac is out, the next lowest non-bank interest rate is 8.5%.

So, instead of a 0.7% higher rate, if going from a main bank to a non-bank, there is now a 1.7% jump.

That widens the gap between non-banks and a main bank.

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Resimac’s exit will have a flow-on effect on the property industry

Most people don’t realise that Resimac backed a lot of other companies.

Take Squirrel's Launchpad product. This lets first-home buyers to buy with just a 5% deposit.

The first home buyer would put in 5%. Squirrel Money would do 15% of the money. And Resimac would lend 80% of the money for a house.

With Resimac gone, Squirrel will need to find another lender. Whoever they find will likely have higher interest rates.

Then, you get the shared ownership models. Developers like Wolfbrook and Williams Corporation will buy a house with you.

For example, you might have a 10% deposit. The developer will put in 10% of the money and get a 10% share of the house.

Resimac would then loan you the other 80% of the money.

With Resimac out, the developers need to find another lender. That will likely push up the interest rate a buyer has to pay to use these options. That makes it more expensive for buyers to use a shared ownership model.

Why is Resimac closing?

Resimac is a huge Australian-owned company. Last year, it made a $98 million profit in Australia. But, in New Zealand, it makes a loss of $2.2 million.

While New Zealand’s population is around 20% of Australia’s. We made less than 6% of Resimac’s revenue and -2.4% of its overall profit.

The company doesn’t think that the New Zealand market will become any easier. So they’re closing their doors. Our market is too small, too hard and not profitable enough.

What if I have a mortgage with Resimac?

Don’t worry. If you have a loan with Resimac, you don’t have to find another lender.

If you’ve got a loan and are making payments, they’ll still be there.

However, some investors might run into problems.

For instance, let’s say you have your own home at Resimac. You then want to borrow against it to buy an investment property.

You’d need to put a mortgage application into Resimac to borrow more money.

They’re not accepting applications. So, to grow your portfolio, you need to move to refinance to another lender.

What gap will Resimac leave in the market?

There are a couple of loan options that Resimac offered that are going to be hard to replace. Here’s what I’ll miss most.

1) Resimac’s 80/80 loan

This loan lets investors buy property with just a 20% deposit.

Usually, you’d need a 30% deposit to buy an existing investment property.

But if you put your own home with Resimac, they’d let you buy up to 5 investment properties with just a 20% deposit.

2) The Specialist investment loan

This loan lets you get a 20-year interest-only loan. There were big fish hooks. It had a high interest rate, and you needed a 50% deposit.

But it worked for some investors. Now, these options are off the table for Kiwi investors

Is this the beginning of the end for all non-banks?

It’s unlikely that this will cause a domino effect. Other non-banks will likely keep their doors open. It’s not another finance company collapse like in 2007.

Resimac isn’t going bust. They haven’t run out of money. They are making almost $100m AUD a year.

But they’ve chosen to pull out of New Zealand because their NZ business loses them $2.2m a year.

That doesn’t mean all non-banks are in the same position. One non-bank lender I spoke to told me that they’ve seen Aussie lenders come and go in New Zealand.

That domino effect will be felt by the other lenders and developers that Resimac backed.