CFML carves out niche with new products

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The New Zealand-owned non-bank lender looks set to make an impact by listening to mortgage advisers, offering competitive loan options and leveraging market knowledge to meet the needs of diverse borrowers

CFML LOANS is quietly launching as a broader-spectrum lender with a key objective of giving mortgage advisers and their clients genuine options outside of the banks for a range of loan types. Central to its strategy is leveraging the market knowledge of advisers to provide products that make an immediate impact for borrowers. “Our distinct edge lies in our attentive ear to the needs of these advisers. We’re dedicated to delivering products that seamlessly integrate into their recommendations, offering interest rates on par with traditional banks,” says Johny Kale, CEO at CFML Loans, which includes CFML Lending Limited and Conrad Funds Management Limited. “We’re confident that by closely aligning with mortgage advisers and offering competitive products, we’ll propel CFML Loans to rival the size of other prominent non-bank lenders that we aspire to match.” Long associated with bespoke financial service provider Funding Partners, CFML Loans is now also offering its products to the wider market via a new team of business development managers who officially started in mid-May 2024. “In mid-May, CFML Loans underwent a significant shift in its distribution strategy. We’ve transitioned to employing our own business development managers, marking a pivotal step in our growth trajectory. This decision reflects our commitment to fostering stronger connections with our clients and partners, particularly mortgage advisers. “By establishing our team of BDMs, we aim to enhance our responsiveness to the evolving needs of our clients. This move enables us to engage directly with mortgage advisers, actively listen to their feedback and tailor our offerings to better serve them and their clients. “We’re excited to announce that our first BDM was Yuan Fang, based in Auckland. Yuan’s expertise and local presence will further strengthen our presence in the market and reinforce our dedication to delivering exceptional products and services. This strategic initiative underscores our unwavering commitment to client-centricity and continuous improvement.”

Conrad Funds Management Limited (CFML) is a New Zealand-based boutique fund manager, licensed in 2016. CFML offers access to experienced professionals with a property focus. Its lending arm, CFML Loans, specialises in residential first mortgage lending and operates as a non-bank lender. When working with mortgage advisers across New Zealand, CFML Loans seeks to ensure quick responses from a team with over 30 years of experience. The company is committed to delivering tailored lending solutions and a positive customer experience.

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“We’re dedicated to delivering products that seamlessly integrate into [advisers’] recommendations, offering interest rates on par with traditional banks”

Johny Kale, CFML Loans

CFML has done its homework in terms of what advisers want, conducting workshops in the latter part of last year with a select few to identify gaps in the market. “The mortgage advisers that we work with closely have been very supportive of what we are trying to achieve, and we have already launched products in response to their feedback,” says Kale. “Their feedback is very important to CFML Loans, and we will continue to work with these mortgage advisers to keep developing better outcomes for them and their clients.”

The CFML Home Loan offering is tailored for consumer clients embarking on the homeownership journey. Kale sees this market as having done well over the last year. “We haven’t really targeted this part of the market at all in the past, mainly because we thought the valuations were a bit overpriced. Now, we feel a lot more confident that we can lend up to 80% on someone’s home … in line with most of the non-bank lenders.” He puts this down to CFML’s relatively conservative stance during the low-interest-rate-fuelled ‘go-go days’ of 2021 and early 2022. “During COVID, we thought the market was a little too hot. We’re seeing pricing get to the level now where we’re quite

This product, coming online through an initial soft launch, is likely to turn heads. It capitalises on CFML’s strong reputation among investors and provides a solution to a problem Kale says many are facing in the current high-inflation environment and prolonged cost of living crisis. Things such as insurance costs, council rates and maintenance costs are top concerns for investors, and the proportion of them thinking about selling sits well above historical three-year averages. “There are a lot of investors out there at the moment saying, ‘it’s all too hard, I’m just going to sell my properties’,” says Kale.

But at the same time, feedback from the market is that there is simply a need to hold on until rates eventually fall, and that investors will welcome tools to help them do that. This is where CFML’s pioneering CFML 321 Loan product comes in. “It offers a unique solution tailored for non-CCCFA investor clients who are seeking a cash flow advantage over the next three years. This gives them time and it gives them cash flow, while remaining very competitive with bank interest rates,” Kale says. “We genuinely think that this is the right time to launch a product of this type in the current interest rate cycle. The advisers we work closely with eagerly anticipate presenting it as a genuine alternative to traditional banking options, recognising its potential to meet the distinct needs of borrowers. “Both the CFML Home Loan and CFML 321 Loan products provide borrowers with a genuine choice between banks and ourselves, and we hope that by being competitive with the banks on rates, we can beat them on serviceability.”

Building a range of products based on market needs

Setting the standard for innovation with the CFML 321 Loan

Published 01 Jul 2024

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“The mortgage advisers that we work with closely have been very supportive of what we are trying to achieve, and we have already launched products in response to their feedback”

Johny Kale, CFML Loans

The product structure is an innovation that signals CFML Loans is well on its way to carving out its niche. “We’re not going to get all the business – and we were never aiming for that. But if we can get market share that reflects the [need for the] products we have designed based on mortgage adviser feedback, we’ll be very happy.” Kale keeps one ear close to the ground on interest rate moves both here and abroad, and with more BDMs out in the market talking to advisers, CFML Loans has a direct line to the indicators that market demand is shifting. “We’re excited. But we also know we’ve got a lot of hard work ahead of us to be able to deliver what we want to deliver.” He is also taking the prospect of Reserve Bank of New Zealand rate cuts not happening until 2025 in his stride when it comes to the product strategy CFML Loans is rolling out with the CFML 321 Loan. “The RBNZ over the last 12 months has been consistent and has stuck to its word. The RBNZ has a tough job, and some of its decisions will not always be liked, but it has a job to do, and getting inflation under control is vitally important for our economy. CFML Loans doesn’t predict a rate cut this year, with 2025 looking more promising for cuts to the OCR [official cash rate].” Given the somewhat pessimistic tone around the economy of late, CFML Loans’ confidence is refreshing – perhaps underscored by a commitment to continue product development where there are empirical needs communicated by advisers at the coalface. “Building on this momentum, we’re poised to introduce additional products throughout the year, informed by ongoing collaboration with our mortgage advisers. These offerings will target different client profiles, maintaining our unwavering commitment to client-centric solutions. “We’re confident that these initiatives will continue to enhance the experiences of both the mortgage advisers we work closely with and their clients,” Kale says.

Scaling for future success

Proportion of investors considering buying or selling

May 2024

17%

31%

Apr 2024

20%

33%

Looking to buy

Looking to sell

Mar 2024

22%

30%

Feb 2024

22%

34%

Jan 2024

No data

Dec 2023

19%

33%

Nov 2023

20%

29%

Source: Crockers Property Management and Tony Alexander Investor Insight surveys

The CFML Standard Loan product covers an area that the non-bank lender is perhaps traditionally most familiar with. “The CFML Standard Loan product is available to accommodate both investors and owner-occupier clients, and borrowers who don’t qualify for CFML Home Loans or CFML 321 Loans – it’s a cover-all product,” Kale explains. CFML provides options for both interest-only repayment and principal and interest terms,

catering to the diverse needs of the market, including investors. While a certain credit rating threshold must be met, this threshold is less stringent than that required for a CFML Home Loan. “The positive response from borrowers embracing this option is heartening, reflecting its relevance to the market,” Kale says. The fourth product offered by CFML Loans is the non-prime CFML Specialist Loan, which is specifically tailored for borrowers who have encountered credit challenges in the past and therefore don’t meet the eligibility criteria for the CFML Home Loan, CFML 321 Loan or CFML Standard Loan products. The CFML Specialist Loan product is classic non-bank lender territory, targeting those customers who fall through the cracks at traditional banks due to restrictive lending practices or the banks’ unwillingness to operate ‘outside the box’. “[Such clients] have probably gone through quite a few rejections, and it may take more time for us to assess the loan and get into the complexity of the loan after considering the client’s circumstances,” Kale says. Feedback that CFML Loans has heard from advisers on the CFML Specialist Loan suggests there is also a genuine need in this area.

CFML’s new product line-up

CFML Home Loan

Owner-occupier buying home in own name

Principal and interest loan only

Good credit record

CFML 321 Loan

Investor or owner-occupier buying home in trust or company

Principal and interest loan only

Good credit record

CFML Standard Loan

Investor or owner-occupier buying home in own name who doesn’t qualify for CFML Home Loan or CFML 321 Loan

Both principal and interest loan and interest-only loan

Good to average credit record

CFML Specialist Loan

Non-standard borrower with weaker credit record

Both principal and interest loan and interest-only loan

Case by case

Target market

Loan type

Credit score

Source: CFML

confident that we can take a little bit more risk [which is] effectively what we’re doing with the CFML Home Loan product,” he says. CFML Loans saw an immediate increase in business from mid-May as advisers who knew that the product was coming online quickly jumped on it. The spike in interest reflects the product’s viability in the market as an alternative to traditional banking options. “It cements the status of the CFML Home Loans product as a genuine choice,” says Kale. “If they’ve got a good credit rating, haven’t had any defaults, can provide 20% deposit, can pay principal and interest, we’re very happy to offer the CFML Home Loans product to the client, subject to standard credit conditions and completion of responsible lending checks. Those people meeting these criteria will benefit from highly competitive interest rates. “The same can be said for our new-to-market product CFML 321 Loans. This product focuses on clients who are investors, have their housing portfolio, and are having to make some tough decisions whether to sell all or part of their portfolio or not.”

For more information, you may contact 0800 236 588 or email loans@cfml.nz