An update on our Investor platform - September 2020

Financial planning Written by Squirrel, Sep 17 2020

What's the latest activity?

We’ve seen a kick up in the amount of money we’re lending across personal loans and our residential mortgage backed products over the last four weeks. Alongside this, we’ve seen a strong flow of new investors registering (+18% since March), and existing investors adding to their holdings (retail investment holdings are up over 40% since March).

Economic cycle

It feels like we’re through the first wave of Covid impacts, which has had some unexpected outcomes like the housing market performance over the last few months.

The second wave is about to start as wage subsidies come to an end, and the first mortgage deferrals begin to be reviewed by banks. While we’re not economists, there is every chance that some difficult conditions are going to start to kick in. We may not see it too much before Christmas, however we’ll be watching portfolio indicators closely in January and February.

Courtesy of our Mortgage Adviser team, we get to see in real time the type of activity taking place in the residential housing market. A couple of observations:

  • First home buyers are taking their opportunities with record low interest rates to get themselves a nest. Our numbers are the strongest we’ve ever seen.
  • Investors are making the most of the LVR restrictions being removed and looking to leverage the equity buffer they have been forced to hold by the RBNZ.

Our Personal loan portfolio appears to be performing better than the market in a relative sense. Our arrears rate is substantially lower than the market, and the number of loans we have in hardship has dropped to a normal level for the portfolio.

Interest rates

As we know, low interest rates are at an all-time low across the board, so this comment is much more about what we’re thinking for Squirrel.

On the assumption that the Reserve Bank lowers the OCR in the New Year, and the trading banks respond with cuts of their own, then there is every likelihood that we’ll also lower our interest rates for borrowers and investors.

These changes are likely to be a way off (February - April next year), so between now and then, we hope you’re able to make the most of the investment interest rates we have available to you.

Our Home Loan and Business Property Loan investment classes have floating rates. This means if you’re invested in these investment classes and we move the interest rate, you’ll see that flow through to your investments with us.

Our Personal Loans run on fixed rates, so you’re locked in at the rate you invest at and it won’t change over the term you’ve invested for.

New investment opportunity

Our Home Loans continue to be available, offering a 4.00% p.a. return. If you keep investing, we’ll keep providing more loans for you to invest in. Loans are available now so you can be invested immediately.

To get a real life example of what these loans are for, you can read a case study here.

Our Business Property Loans for residential construction and single property subdivisions return 5.00% p.a. and we have a strong supply pipeline of these loans. Loans are available now so you can be invested immediately.

Read a case study on this type of lending here.

For Personal Loans, we’re continuing to focus on the lower credit risk end of the market. Our term investments for 1 year return 6.00% p.a., 2/3 years return 6.50% p.a., and 5/7 years return 7.50% p.a. We’ve seen the highest levels of investment orders waiting for loans since February, and we’re doing our darndest to hunt out the right type of loans for you.

 

We can help. Have a chat to one of our advisers.