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Challenger departs New Zealand market

Staff Reporter 6 minute read

The appeal of the New Zealand mortgage market has finally run cold for Challenger Mortgage Management (Challenger).

Speaking to Mortgage Business, a Challenger spokesperson confirmed that the company will withdraw from the market by the 29th of August 2007.

The company will “cease settling new loans” but will continue to service existing loans as normal from Australia. Challenger also emphasised that “there will be no impact on commission payments” for loans settled before the date of withdrawal.

Fixed-rate fallout


While Challenger’s NZ$250 million loan book – written across approximately 60 mortgage managers – is but a small percentage of the country’s NZ$136 billion mortgage industry, the lender’s exit highlights the challenges of turning a dollar in the NZ market for non-bank lenders.

The latest Reserve Bank of New Zealand (RBNZ) interest rate rise set the official cash rate at 8.25 per cent. While many borrowers remained protected from recent rate hikes via fixed-rate loans, trouble could be looming for approximately half of the country’s borrowers as their fixed-terms are set to expire.

Figures released by the RBNZ in July have shown that 24 per cent of New Zealand home loan borrowers’ fixed-rate period will end May 2008, with a further 30 per cent the following year.

As fixed-terms end, borrowers will be forced to refinance their loans at the current interest rate.

“The core differences between the Australian and New Zealand markets, including the high prevalence in New Zealand of fixed-rate funding, was the major driver for Challenger’s withdrawal,” the spokesperson said.


While Challenger will close its New Zealand office all New Zealand service telephone numbers will remain the same – redirected at Challenger’s cost to the lender's Australian-based service teams.

The withdrawal from New Zealand, said Challenger, will not affect the lender’s Australian operations.

“Challenger’s mortgage management division believes there are continued opportunities for growth within the Australian market, and we look forward to focusing our resources on our Australian operations in the future,” the spokesperson said.

Considering the feasibility of the New Zealand market for non-bank lenders, mortgage insurer Genworth Financial highlights a market dominated by the big banks.

According to Genworth’s country executive and director Peter Hall, it’s a very different landscape to Australia with proportionally smaller market share available to the non-bank sector.

Speaking with Mortgage Business, Hall believes lenders entering the New Zealand market need to carefully consider the economies of scale.

“The New Zealand market is a lot smaller than Australia. Lenders need to consider the resources they’ll need to commit in order to build a viable business,” he said. 


Challenger departs New Zealand market
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