Just want to emphasise that Mortgages are a massive blue ocean for HGH now that it has entered.
The NZ mortgage market is now over $300 Billion in size, so having a target as low as 1% of that market would grow HGH significantly.
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Just want to emphasise that Mortgages are a massive blue ocean for HGH now that it has entered.
The NZ mortgage market is now over $300 Billion in size, so having a target as low as 1% of that market would grow HGH significantly.
But is it actually good for HGH to go bigly into the ordinary mortgage market?
Might as well sell up and buy ANZ.
Does anyone know if Heartland does not give preferential access to the brokers analysts?
Exactly, clearasmud, they can still hit ~4% NIM with these rates, so go for gold I say. They are certainly making a big push with TV advertising, so I think they are pretty serious about grabbing a slice of the action.
I had a rant recently about a failed application online, but it transpired I made a mistake and checked something by accident...I was accepted in the end. But Kiwibank have me tied in for another 12 months, so I'm stuck there for now. One thing I found though, while on the face of it the Heartland rates look very competitive, they are a bit light on the cash incentive side of things compared with what I'm used to getting at Kiwibank at least (it's been 2 years though), so could be a case of horses for courses.
Didnt’t Snoopy once explain how lending at sub 2% can still give a NIM of 4% seeing intuitively it can’t be done.
You can't get a NIM of 4% but you can get a good margin on the capital needed to support the lending. If you make a 1% margin on the RBNZ/other borrowing financed bit and 2% on the equity financed bit the return on equity is 11% (if equity finances 10% of the lending). The lower you can get the equity supporting the loans, the higher the return on equity.
Pretty happy with HGH..one of my biggest holding. Reconk will hit $2 in coming reporting day
And refining some of the numbers, the Non-property investor residential mortgage loan has a risk weighting of 0.35 if the loan is current, has a <80% LVR and is to a residential owner occupier (HGH conditions?). While HGH may ultimately need a 16% capital adequacy ratio, the 0.35 weighting means if the book had no arrears, you could theoretically have equity financing 5.6% of the loans and the remaining 94.4% financed by borrowing. >15x leverage helps the maths.
RBNZ's funding for lending scheme should be available for up to half of all new eligible lending. This would mean half the financing needed for the new 1.85% loans could be sourced from RBNZ at the cash rate (0.25%). This would create a margin of 1.6% (not 1%) on this part of the financing structure.
These changes would improve the return on equity to a theoretical 25%+. Unfortunately income tax will lower this, as will any bad debts, commissions paid to brokers, any large sign-on legal fees subsidies and non-automated back-end processes. Assuming all these other bits are well managed it looks like this <2% lending could be nicely profitable.
I am a bit more weary about this growing emphasis on the mortgage market, in direct competition with the big boys. We have done very well for many years with our fringe products where the big boys have pretty much left us alone, reverse mortgages being a prime example.
Yes of course the RBNZ is currently providing some very cheap lending but going into the mortgage market boots & all has to be a long term strategy that will last well beyond the cheap funds from the RBNZ.