Basecorp leverages falling rates and product expansion to fuel growth in NZ's non-bank sector
This article was produced in partnership with Basecorp Finance
Falling interest rates are breathing new life into New Zealand's non-bank lending sector after years of challenging conditions.
Basecorp's lending book has climbed back above $1.1 billion as the company passes through Reserve Bank rate cuts to borrowers while expanding its product offering across residential and commercial markets. The Hamilton-based lender exemplifies how non-bank providers are positioning themselves to capitalise on what appears to be a turning tide in New Zealand's property and lending markets.
Rate cuts drive competitiveness surge
The Reserve Bank's easing cycle has provided the most significant boost to non-bank competitiveness in recent memory. Since August last year, Basecorp has passed through the full extent of falling bank bill rates, which closely mirror the Official Cash Rate (OCR) movements.
"We've been cutting our own rates as falls in bank bill rates have occurred since August last year," said John Moody, chief financial officer at the firm. "The effect on the back book has been very clear – ongoing payments have fallen considerably, a welcome boost for our borrowers in a difficult environment."
The company has maintained its premium to bank floating rates at less than 1%, with this differential actually narrowing slightly as market conditions have improved. Overall rates at Basecorp have now fallen below 7%, marking a substantial improvement in the sector's competitive position.
With market expectations pointing to 2-3 further rate cuts from the current OCR of 3.0%, Basecorp anticipates passing on the majority of these reductions. The company expects its rates to reach between 6% and 6.5% at the bottom of the current cycle, representing a significant shift in the cost of non-bank finance.
Swift adaptation builds adviser confidence
The speed of response to OCR movements has become a point of differentiation for non-bank lenders competing for adviser business. Basecorp has implemented same-day cuts to floating rates, with immediate communication to its adviser network.
"We think in that regard we've been one of the leaders in the non-bank market with this approach, and think advisers have appreciated our consistency, the prompt communication, and the narrow range of rates we offer around our headline rates," Moody explained.
This responsive approach has coincided with a broader strategic shift. While the company has widened its lending policy over the past 12 months, management believes the underlying change in interest rates has been the primary driver of increased business activity in 2025.
Product expansion targets one-stop solution
Basecorp's policy changes reflect ambitions to become what it describes as a "one-stop shop" for advisers handling applications that fall outside regular bank mortgage business. Recent expansions to policy include increasing maximum receivable size to $2.5 million, extending maximum land area to 20 hectares, and raising deal sizes to $7.5 million.
The company has also made changes to consumer bridging finance and added a commercial property product to its suite of offerings. These changes, supported by an experienced lending team led by Craig Rolls, aim to assist advisers with increasingly diverse borrower scenarios.
"Through that widening and with our experienced lending team, we can assist advisers with more diverse borrowers and scenarios – and we think that approach helps us to continue to maintain our position as one of the more flexible, well-funded, and accessible lenders amongst our non-bank peers," Moody said.
Volume surge reflects market recovery
The strategic changes have translated into measurable business growth. Through the end of 2024 and into 2025, Basecorp has experienced encouraging demand, with origination volumes almost doubling in dollar terms from 2023 levels.
The improved performance spans multiple borrower categories, with no single trend driving the increase. Adviser scenarios have encompassed first home buyers, credit impaired borrowers, property traders, investors returning to the market, residual stock funding, and self-employed borrowers who fall outside traditional bank criteria.
The company's new commercial property secured product has also generated strong demand levels, indicating appetite for diversified lending solutions as market conditions improve.
Portfolio growth amid market headwinds
Despite the positive origination trends, portfolio growth tells a more complex story about current market dynamics. Basecorp's portfolio has increased by approximately $50 million year to date, reaching above $1.1 billion in total.
Management views this growth positively given the broader context of a non-bank market that has contracted considerably in recent years. However, healthy bank appetite in the refinance market continues to drive elevated repayment volumes, offsetting some of the gains from new lending.
The company expects this dynamic to moderate as interest rate differentials between non-banks and traditional banks narrow with further OCR cuts. This convergence should support continued portfolio expansion as fewer borrowers refinance back to bank products.
Funding strength supports growth ambitions
Access to stable funding remains a critical factor distinguishing successful non-bank lenders in the current environment. Basecorp maintains what it describes as very strong capitalisation and funding, supported by long-term relationships with wholesale funders, investors, and major banks.
The company recently secured an additional $100 million in wholesale funding to ensure robust capacity for anticipated medium-term demand. Plans include returning to capital markets within the next 3-6 months for a major funding raise, subject to market conditions.
"We see stable funding as essential to maintaining a consistent credit policy and level of appetite – it has been one of the key factors in our success over the last few years, and advisers should have confidence they'll see more of the same from Basecorp in the years ahead, even if funding conditions become challenging," Moody noted.
Market upturn gains momentum
Broader market indicators support the view that New Zealand's property and lending markets are beginning to recover from recent challenging conditions. Market lending volumes and property transactions have accelerated in recent months, though the pace of recovery has been slower than initially expected.
For non-bank lenders, this represents both opportunity and challenge. Lower interest rates ahead should provide further boosts to the non-bank proposition after a period of subdued growth for the sector. However, competition for quality business is likely to intensify as conditions improve.
Basecorp is positioning itself as a leading non-bank player for the next phase of the cycle through three key focus areas: managing funding diversification to support continued book growth; broadening and enhancing relationships with advisers; and ensuring lending policy remains market-leading across both short and long-term products.
The company reports encouraging signs in adviser engagement, with increased deal flow from regular advisers, new advisers using non-bank services for the first time, and previously absent advisers returning as they once again see viable non-bank business opportunities within their customer set.
As the Reserve Bank prepares for its next OCR decision on October 8, the trajectory appears set for continued monetary policy accommodation. For non-bank lenders like Basecorp, this environment represents perhaps the most favourable conditions in several years to rebuild market share and demonstrate the value proposition that attracted borrowers and advisers in previous cycles.
“We think it’s an exciting environment to be a non-bank lender,” said Moody.
