Regis Nyamakanga
2 October 2007
Johannesburg — INVESTEC and the investment holding firm Purple Capital yesterday launched Integer, a new lender to compete in the R700bn home loans market, previously a preserve of the big four banks.
This comes as the global credit crunch continues , with the UK saying yesterday it may need to cut interest rates to boost its economy. It singled out the housing market as the area of greatest vulnerability.
Simon Stockley, the CEO of Integer, was unfazed by the US subprime meltdown, saying once the global financial markets rebound, asset managers would return, seeking quality mortgage assets to fund.
He said Integer would offer standard 20-year amortised home loans, which would be 85% of the value of the home, and up to an amount of R2,5m. Although not a bank, it also offered banking services through a partnership with Investec Bank.
Absa group, Standard Bank, First National Bank and Nedbank group control the bulk of the local mortgage market.
Integer's loan book would be funded through securitis ation in domestic and foreign capital markets, said Stockley, who pioneered securitisation to finance home loan books in SA when he founded SA Home Loans in 1999.
Integer had a R500m loan from Investec to fund its book in the pre-securitisation phase. Mortgage securitisation is a process where home loans are pooled and sold as financial instruments in the capital markets. The interest payments and capital repayments provide the value and security of the instrument. This enables a home-loan provider to finance its loans without having to take deposits.
The South African securitisation market has grown exponentially over the past seven years with total issuances exceeding R86,7bn by August this year.
"With the South African debt markets now rated as the sixth most liquid in the world and the relaxation of exchange controls there is an opportunity for new entrants into the home loan market, increasing competition and benefiting home buyers and owners," Stockley said.
"We do not see the current US subprime meltdown as a problem for launch but rather as an opportunity. Once the dust has settled, asset managers will once again be seeking quality mortgage assets to fund and we are targeting the very best underlying collateral."
Integer, which employs 50 people, would initially sell its home loans through its call centre agents, selected mortgage brokers, bond originators and the internet, Stockley said.
The company aimed to "challenge the status quo with a product that is flexible, very competitive on price and provides customers with a service that is personal, easy and fast," he said.
Integer would target the middle and mass market and expected South Africans with existing home loans to switch to it for better rates and service.
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