Mortgage investments will be one of the few remaining debenture options
UDC’s decision to pay out $922 million in investor funds early is ‘bad news’ for Kiwis as it has taken a high-performing investment option off the market, according to specialist lender Southern Cross Partners.
New Zealand finance company UDC is planning to pay back all of its secured debenture investments by the end of the year. Southern Cross Partners CEO Luke Jackson says that when it comes to reinvesting the returned $922 million, mortgage investments are likely to be among the only remaining high-performing debentures remaining on the market.
“UDC’s decision to wind up its debenture programme shrinks the pool even further, particularly for secure debentures like that of the ANZ-owned UDC,” Jackson said. “This comes at a time when we know that New Zealand’s retirement savings are woefully behind Australia.
With only four or five debenture options remaining, I’d have to say that New Zealanders are getting poorer; our options to increase wealth are shrinking and this could end up driving people into riskier investments they don't understand."
Jackson says that investors who depend on interest for earnings or retirement may find themselves ‘between a rock and a hard place’ when it comes to their investment options, with peer-to-peer mortgage investment, rental property investment and stocks being among the shrinking pool remaining options.
"While each of these investment options has different risks and regulatory requirements, only the first mortgage investment, the shrinking pool of debenture funds and potentially rental property can yield high performing interest rates,” he explained. “That’s not a lot of choice when you consider that there are a lot of people out there relying on interest earnings to fund their retirement."
"It’s not a question of how attractive an investment is, or how secure that investment may be, when an investor has no choice but to seek out high performing investments because he or she is living off the interest - it just pushes people towards riskier investments or unproven schemes.”
