CARTER Last year was quite challenging for New Zealand’s securitisation market. This was mainly a reflection of reduced lending origination by nonbanks. The high interest-rate environment made it hard for nonbanks to originate significant volume of mortgages. Asset lending was also lower, largely due to macroeconomic conditions.

However, there were certainly some green shoots, particularly toward the end of the year, when originations started to pick up as interest rate cuts gave a source of optimism. Last year we had six ABS [asset-backed securities] and no RMBS transactions. Going to Australia for the Australian Securitisation Forum’s annual conference in December last year, it was quite a different experience. The Australian market reached record levels of A$78 billion (US48.7 billion) of issuance in 2024.

On the investor side, there is generally good appetite in New Zealand, especially in the senior tranches. A number of domestic investors look at this product and are always chasing issuance to support 'New Zealand Inc'. Quite a few of them look at the Australian dollar market, too – and further afield. Likewise, there are Australian investors that look at New Zealand bonds, all the way down the capital stack.

This year, we hope to see a better outcome for New Zealand, in the number of deals and also in origination volume.

CARTER Rates coming down will certainly help. Nonbanks find it hard to compete with banks on mortgages when rates are high. A lot of their lending is variable rate, and it’s hard for them to compete on price.

When rates were low, we witnessed nonbanks originating prime and near-prime mortgages. They could compete on a service level as they can turn around lending applications a lot quicker than the major banks and cater for the market that sits outside the vanilla borrower. We are hopeful that, with rates coming off and sentiment changing, we will see a lot more growth in the nonbank sector.

OVENS The reserve bank reported that nonbank lending made up only 1.4 per cent of all home lending in January 2025. In 2008, it was a little more than 5 per cent – it has drastically crunched in. To Janine’s point about the higher cost these lenders suffer, one thing that would really help would be a review of the capital requirements for securitisation.

CARTER There has been little motivation for it, to be honest. The pricing benefit is not there, so it is viewed as extra work for no additional reward. Taking an auto book for example, the green assets will be electric vehicles and some issuers feel there is risk of greenwashing. It is unfortunate that green securitisation has not been picked up here. It has happened in the Australian securitisation market, but we do not expect the situation to change in New Zealand any time soon.

NG However, it can come in different forms. For instance, securitisation principles can
apply to things like commercial finance and social housing.

SUTCLIFFE We should acknowledge the announcement the Minister made at the KangaNews-ANZ New Zealand Capital Market Forum, about funding for the CHFA [Community Housing Finance Association]. To have significant Crown support for a private agency shows that the government is willing to use a LGFA [New Zealand Local Government Funding Agency]- style model for different purposes, such as community housing, as well as seeing what it is doing in the water sector.