Lender targets investors, overseas borrowers

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Mortgage advisers who encounter major bank barriers when seeking finance for property investors and overseas borrowers are turning to knowledgeable non-bank lenders such as CFML Loans for fast, flexible solutions

DESPITE THE current challenges of New Zealand’s property market and a slowing economy, CFML Loans’ leadership team is positive about the future and potential growth opportunities. The Auckland-based non-bank lender is led by CEO Patrick Middleton and chief operating officer Johny Kale, both highly skilled executives who share more than 50 years’ experience in the funds management industry. Middleton has held senior management roles at Perpetual, Spicers Portfolio Management Ltd (NZ) and Westpac, while Kale has worked in the UK and Ireland, also in senior positions, most recently at Northern Trust and North Asset Management LLP. CFML Loans has been active in New Zealand since October 2019. The non-bank lender has scaled up and is building a strong foothold among mortgage advisers in the country’s residential first mortgage lending market, targeting property investors, recently returned Kiwis and overseas borrowers. CFML Loans offers loans only through mortgage advisers, working with them through the company’s distribution business, Funding Partners.

CFML Loans is the lending arm of Conrad Funds Management’s business. CFML Loans (which includes CFML Lending Limited and Conrad Funds Management Limited) is a non-bank lender that specialises in residential first mortgage lending. CFML Loans works with mortgage advisers throughout New Zealand to ensure customers get a quick response from our highly experienced lending team who have worked in the industry for over 30 years. Our strong focus is on providing a solution to customers’ lending needs, while also delivering a positive customer experience.

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CFML loans at a glance*

First mortgage security only

“Our aim is very clear – if we’ve got a loan application with all the supporting paperwork, including responses to responsible lending enquiries for consumers, then there’s no reason why people shouldn’t have their answers on loan approval within 24 hours”

Patrick Middleton, CMFL Loans

Kale says CFML Loans targets borrowers who are established investors and have solid assets, but, “for whatever reason, banks are not willing to fund them to purchase the additional rental property they are seeking”. “These are borrowers who we see as being very strong in terms of assets and servicing,” he says. The non-bank lender offers first mortgage loans for the purchase of residential property in New Zealand. Loans range from $50,000 to $2.2m, with terms of between five and 30 years, on floating rates only. Middleton says loans can be for owner-occupied or investment properties or for refinancing purposes.

He says a few factors are affecting the current property investor market. “Higher interest rates are having a bearing on returns and the validity of buying residential property as part of an investment portfolio. There are also barriers to entry that have come in over the last couple of years – for example, the bright-line test and tax deductibility on interest.” Barriers to entry in the property market have been a factor, along with interest rate increases, which have led to the property market cooling off, Middleton says. “However, it’s a long-term game, and as we see interest rates start to come off, property values are definitely coming down, making it more attractive [for investors] to step more actively back into the market.” Kale says another borrower segment CFML Loans has focused

Funding Partners has been critical to the growth of CFML Loans, Middleton says, with the non-bank lender’s first mortgage residential loan offered by Funding Partners to advisers. But because Funding Partners also offers advisers other lending products, it develops deeper relationships with advisers, providing further opportunities for CFML Loans. “Funding Partners are important to us because they are out there on the front line representing our brand in the residential market space, talking to advisers and working with them to find a solution which then ultimately could end up on our credit desk.” CFML Loans also features on the lending panels of all major adviser aggregators. Middleton says the company has received very positive feedback from advisers through Funding Partners, especially when helping advisers get clients across the line in high-pressure, time-dependent deals. “As we're starting to get more penetration, advisers are talking amongst themselves and saying, ‘Hey, I've used CFML Loans, you should give them a try’. So word of mouth is continuing to build.”

“Another borrower segment we’ve focused on is Kiwis moving back to New Zealand from overseas. When they arrive, they don’t have a credit history like other borrowers who are with the mainstream banks”

Johny Kale, CFML Loans

The non-bank lender’s presence among the adviser network is growing, Kale says, and CFML Loans wants to encourage advisers to consider the company if they have investor or migrant customers who have been rejected for finance by the banks. Middleton says CFML Loans has been developing its systems, processes, credit team and turnaround times to ensure they are working well and have reached a high service level. “Our proposition is only as good as what we can deliver to the advisers, and the advisers need quick turnaround times – a solid answer, either yes or no, so that they can deliver the service back to their customer.”

Middleton says the Reserve Bank of New Zealand is battling to control inflation, and interest rates may rise at least another 25 basis points in May 2023. “There’s still a large percentage of the fixed rate loan market to roll onto higher rates over the next six to 12 months. We’re going to be seeing households coming under more stress as they struggle to meet their mortgage obligations.” This provides an opportunity for advisers to assist customers to consolidate debt and manage cash flow, he says. There are also opportunities for investors to buy cheaper property if they can afford it and reap the future benefits of lower interest rates when inflation does fall. “Investors are looking at property and saying this is a good buy,” Middleton says. “They're understanding the cost of money at a variable rate and can afford it, knowing that over the long term those rates will come off.” While the more speculative investors have left the market, skilled investors are still borrowing. “We love supporting those types of borrowers because they're experienced, they've gone through cycles before, and they're in it for the long term,” Kale says.

People forming arrows towards target. Property investors and overseas borrowers

Customer base

Published 08 May 2023

Eligible loans to individuals, companies or trusts

Loan purpose: Purchase of residential property in NZ; refinance; debt consolidation

Loan amounts: $50,000 to $2.2m

Loan term: From 5 to 30 years

Interest-only period: Up to 5 years

Floating rate loans only

Loans up to 80% LVR

Repayments: Monthly

Loans to CCCFA and non-CCCFA customers

Apartment lending specialist

Lends to overseas borrowers

*Loans subject to lending criteria and approval

AVERAGE HOUSE PRICE VALUES IN DECLINE ACROSS NEW ZEALAND

Mar 03

Source: CoreLogic House Price Index, March 2023

Mar 05

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Mar 15

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Mar 23

$200k

$400k

$600k

$800k

$1.0m

$1.2m

$1.4m

$1.6m

Auckland

Wellington Area

Hamilton City

Value proposition

CFML Loans’ adviser distribution model is via Funding Partners, which works with adviser aggregators and brokerages across the nation through its team of relationship managers. “Funding Partners are the mortgage originators, CFML Loans is the funder,” Kale says. “As a mortgage adviser, you would speak with Funding Partners and the loan deal would be presented by Funding Partners to CFML Loans’ credit team to say yes or no to the loan.”

Tauranga City

Christchurch City

Dunedin City

on is Kiwis moving back to New Zealand from overseas, as well as arriving migrants. “In that first six months, even up to a year, they don't have that credit history that other borrowers who are with the mainstream banks have,” Middleton says. CFML Loans is keen to deal with professionals migrating to New Zealand who are looking to purchase a property and need finance. “We know that they’re probably going to be gone in two to three years’ time, once they've got that history of credit in New Zealand,” Kale says. “We’re here to provide a service – to get them to the stage where they can get ‘back to bank’.”

Middleton says the non-bank lender has expertise in lending against apartments and also to overseas borrowers. “We’ve had a good relationship with the adviser market for overseas borrowers and those lending against apartments.”

Adviser distribution through Funding Partners

CFML Loans understands overseas borrowers, lending and the overall investment lending space, Middleton says. “We've built up that expertise over the last three or four years and are tried and tested in that space.” Middleton and Kale say CFML Loans competes well on pricing, speed of loan approval and settlement, and flexibility. “Our pricing is fair and equitable for the risk we are taking on, and we are competitive within that non-bank lending space,” Middleton says. Kale says, “It’s critical for us as a non-bank provider to be able to service advisers as quickly as we can.” When clients have received a 'no' from a bank, and timing is critical and there are only a few days left to settle, “as long as all of the documentation is in place, then we can definitely get an answer out to them quickly and get the loan settled”. Middleton adds, “Our aim is very clear – if we've got a loan application with all the supporting paperwork, including responses to responsible lending enquiries for consumers, then there's no reason why people shouldn't have their answers on loan approval within 24 hours. “If all the terms are agreed to and they get the document signed with their solicitors, we can settle a loan in 24 hours. “We can tailor our service to the client’s needs. If they're under pressure, we can elevate it so that we're delivering that service to the adviser, but ultimately the client is getting their needs met, and that's because we're not a big institution.”

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