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12-05-2021, 03:22 PM
#14611
Just want to emphasise that Mortgages are a massive blue ocean for HGH now that it has entered.
The NZ mortgage market is now over $300 Billion in size, so having a target as low as 1% of that market would grow HGH significantly.
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12-05-2021, 03:30 PM
#14612
But is it actually good for HGH to go bigly into the ordinary mortgage market?
Might as well sell up and buy ANZ.
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12-05-2021, 03:33 PM
#14613
Originally Posted by Snow Leopard
But is it actually good for HGH to go bigly into the ordinary mortgage market?
Might as well sell up and buy ANZ.
Of course it's good.
The RB is bankrolling Heartland at 0.25%
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12-05-2021, 03:34 PM
#14614
Originally Posted by LaserEyeKiwi
Just want to emphasise that Mortgages are a massive blue ocean for HGH now that it has entered.
The NZ mortgage market is now over $300 Billion in size, so having a target as low as 1% of that market would grow HGH significantly.
Jeez ...low target of 1% is 3 billion
Heartland receivables currently about 5 billion
That would indeed grow Heartland significantly
Just imagine 2% share ...double the size of Heartland
Last edited by winner69; 12-05-2021 at 03:39 PM.
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
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12-05-2021, 04:46 PM
#14615
Does anyone know if Heartland does not give preferential access to the brokers analysts?
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12-05-2021, 05:09 PM
#14616
Originally Posted by Beagle
Not sure what lending at this rate does to their net interest margin...
Originally Posted by Biscuit
...paying them peanuts?
Originally Posted by clearasmud
Of course it's good.
The RB is bankrolling Heartland at 0.25%
Exactly, clearasmud, they can still hit ~4% NIM with these rates, so go for gold I say. They are certainly making a big push with TV advertising, so I think they are pretty serious about grabbing a slice of the action.
I had a rant recently about a failed application online, but it transpired I made a mistake and checked something by accident...I was accepted in the end. But Kiwibank have me tied in for another 12 months, so I'm stuck there for now. One thing I found though, while on the face of it the Heartland rates look very competitive, they are a bit light on the cash incentive side of things compared with what I'm used to getting at Kiwibank at least (it's been 2 years though), so could be a case of horses for courses.
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12-05-2021, 05:15 PM
#14617
Didnt’t Snoopy once explain how lending at sub 2% can still give a NIM of 4% seeing intuitively it can’t be done.
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
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12-05-2021, 05:38 PM
#14618
Originally Posted by winner69
Didnt’t Snoopy once explain how lending at sub 2% can still give a NIM of 4% seeing intuitively it can’t be done.
From last time...
Originally Posted by Cyclical
I imagine you know how it works, w69, but if not, Snoopy explained it well a few months back. He'll be along shortly to put me straight, but something like 15% of Heartland's / depositor's money at whatever cost that may be, then the other 85% from the RBNZ printing machine at the OCR. All adds up to a ~4% NIM. The caveat here is that I may have all that wrong!
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12-05-2021, 05:48 PM
#14619
Originally Posted by winner69
Didnt’t Snoopy once explain how lending at sub 2% can still give a NIM of 4% seeing intuitively it can’t be done.
You can't get a NIM of 4% but you can get a good margin on the capital needed to support the lending. If you make a 1% margin on the RBNZ/other borrowing financed bit and 2% on the equity financed bit the return on equity is 11% (if equity finances 10% of the lending). The lower you can get the equity supporting the loans, the higher the return on equity.
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12-05-2021, 06:13 PM
#14620
Originally Posted by winner69
Didnt’t Snoopy once explain how lending at sub 2% can still give a NIM of 4% seeing intuitively it can’t be done.
I went digging back to October to find a couple of posts we had going on the subject...ok, maybe ~4% NIM was dreaming... The bold bit at the bottom is likely the key though.
Originally Posted by Cyclical
Thanks Snoopy, I think I know where you are coming from, but personally I'm struggling to arrive at ~3.5%, unless you think OCR is going to -2% while Mortgage rates remain unchanged at 1.99%.
Here's my stab at it, all things being equal...please tell me where I'm going wrong:
At today’s rates: |
|
|
|
Laon Amount |
$100,000.00 |
1.99% |
$1,990.00 |
|
|
|
|
Funding Sources: |
|
|
|
Term Deposit |
$15,000.00 |
1.05% |
$157.50 |
RBNZ |
$85,000.00 |
0.25% |
$212.50 |
Total Loan Cost |
|
|
$370.00 |
|
|
|
|
|
|
NIM ($) |
$1,620.00 |
|
|
NIM (%) |
1.62% |
|
|
|
|
|
|
|
|
Originally Posted by Snoopy
I think I can get that net interest margin up a bit Cyclical. A home loan has an RWA (Risk Weightings Adjustment) as low as 35%. That means the loan capital to back up a 35% RWA $100,000 mortgage is not $15,000, but only 0.35 x $15,000 = $5,250. So the bank's cost of 'income in' verses 'funding' on that loan now look like this:
At today’s rates: |
|
|
|
Loan Amount |
$100,000.00 |
1.99% |
$1,990.00 |
|
|
|
|
Funding Sources: |
|
|
|
Term Deposit |
$5,250.00 |
1.05% |
$55.13 |
RBNZ |
$94,750.00 |
0.25% |
$236.88 |
Total Loan Cost |
|
|
$292.01 |
|
|
|
|
|
|
NIM ($) |
$1,697.99 |
|
|
NIM (%) |
1.70% |
|
|
|
|
|
|
|
|
That is of course is just the interest charge bit of the NIM. Normally on top of that there are application fees, approval fees, variation fees etc. Looking on the Heartland website for 'mortgage fees', this particular 1.99% offer looks clean (although that 20% deposit requirement might knock out some applicants). However, I think the key point here is that historical Heartland's 4% net interest margin is across the whole loan book. In some loan categories, the NIM would be less than 4%. Furthermore the 'net interest margin' is only one input factor into the 'net profit margin'. It might be worthwhile settling for a lower NIM if it meant less follow up was required to manage payments due, which implies a positive effect on the 'net profit margin'.
SNOOPY
Last edited by Cyclical; 12-05-2021 at 06:15 PM.
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