RedZed weathers mortgage slowdown

Ian Rogers

A softening in mortgage demand is apparent as pandemic lockdowns disrupt business in eastern Australia, but the head of non-bank lender RedZed Lending believes the slowdown is likely to be short-lived.

"I have sensed in the past fortnight a dampening of activity, but only in the last fortnight," Evan Dwyer, managing director of RedZed, told Banking Day.

"Compare that with the long lockdown we had in Victoria last year. Mortgage demand fell for a couple of weeks then picked up really strongly," Dwyer said.

"We've seen a momentary softening."

ABS lending data released this week shows the value of new housing loan commitments fell 1.6 per cent in June, the first fall in monthly lending figures this year. Now the July data, and maybe August will be restrained as well.

The confusing national response to the pandemic, mainly the vaccine rollout, is no more than static on the funding front, at least for RedZed.

On Wednesday, RedZed priced a A$750m RMBS transaction, the RedZed Trust Series 2021-2.

This is RedZed’s second transaction of 2021, and the mortgage funder's largest transaction to date to part fund its $2.3 billion mortgage book.

This mortgage bond features "EU and UK Risk Retention compliant structures with the inclusion of $100m of pre-funding," the company said.

The transaction "was oversubscribed and supported 100 per cent by real money domestic and offshore investors across all tranches," the firm said.

In keeping with RedZed's niche more than 90 per cent of loans were to the self-employed, with income verified on an 'alt-doc' basis.

Pricing on the $563 million in Aaa-rated Class A-1 notes was at a spread of 80 bps to one month BBSW, 10 bps inside the pricing on the top tier of RedZed's slightly smaller RMBS bond placed in March.

Activity in the RMBS market is on a bit of a roll following a mega A$3.8 billion issue of securities by Macquarie Bank three weeks ago.

Firstmac, a prime mortgage funder, is next in line with a c.$500 million mortgage pool underway.