Wizard writes nearly $40 million a month in Kiwi mortgages

Australia-based Wizard Home Loans, which opened its 11th New Zealand office in February, is now writing nearly $40 million in mortgages here each month.

Friday, March 15th 2002, 11:46AM

by Jenny Ruth

Chief Executive Angelo Malizis says that’s just scratching the surface, representing only about 2% of the New Zealand market.

The company has almost achieved its first objective of establishing 14 offices in New Zealand within two years of arriving here. It is currently "wining and dining" potential operators in Wellington and Lower Hutt and should have them signed soon, he says.

The location of the 14th office hasn’t been decided yet, but it’s likely to be in the North Island. Wizard already has offices is Dunedin and Christchurch and the population probably won’t support a third at this stage, he says.

Wizard’s business model is a type of franchise system.

While Wizard helps in setting up a new office, once it’s up and running, the local partner is responsible for the ongoing costs and the two parties share the revenue stream. But Wizard doesn’t charge a franchise fee, Malizis says.

"We prefer to call it a partnership system." Each partner is given exclusive advertising rights within a defined territory and, once well established, will engage two or three mortgage consultants to cover the area. Once the business reaches a suitable size, Wizard will then encourage the partner to open a sub-office, Malizis says.

The financing for Wizard loans comes from Australian Mortgage Securities, a mortgage securitisation company jointly owned by Wizard and ABN Amro.

In Malizis view, the mortgage lending system here is "very conservative" and dominated by "the all powerful banks." Mortgage brokers here lack the independent image they have developed in Australia, he says.

"Brokers in New Zealand aren’t considered as objective as perhaps they are in Australia. Brokers (in New Zealand) are considered almost lackeys of the banks. They’re struggling a little bit in New Zealand," he says.

"That’s where we saw a big opportunity." Wizard aims to offer both personal, community-based service and very low interest rate loans, pricing its key floating rate product 46 basis points below the major banks. Currently it’s at 6.24% compared with 6.7% for the major banks.

That’s more aggressive than it charges for its premium floating product in Australia. It’s priced at 35 basis points below the major banks.

Wizard also has a no frills basic floating mortgage product in Australia which Malizis says is always the lowest in the market. The company is currently in some hot water over that product with the Australian Competition and Consumer Commission taking it to court alleging misleading advertising. Advertisements run last year claimed features not available with the basis product.

Malizis says the offending advertisements only ran for a couple of weeks and the company withdrew them as soon as it was aware of the problem. The incident is "very unfortunate" because Wizard has made a name for itself in promoting "true rate advertising" and campaigning against such offers as "honeymoon deals," he says.

The New Zealand performance is dwarfed by the Australian operations. The 116 Australian offices should write $A600 million in mortgages this month, if current trends continue, Malizis says. That’s up from about $A400 million a month in the latter months of last year.

Wizard, which is one-third-owned by Kerry Packer’s PBL group, one-third-owned by Deutsche Asset Management and on-third-owned by founder and chairman Mark Bouris, is now Australia’s seventh largest writer of new mortgages behind the "big four" banks, St George Bank and Suncorp Metway.

Deutsche, the newest shareholder, paid $A60 million for its stake back in May last year. Malizis says the rise in the amount of business since then means the whole company is worth approaching $250 million now.

With most of the costs of writing mortgages borne up front and the payoff coming through the life of the mortgage, in Wizard’s case an average of four to four and a half years, the company is set to post its first profit this year, Malizis says.

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