Reverse mortgage lender eyes Australia’s ageing population

Heartland Group Holdings Limited (Heartland) released its full-year results for the financial year 2023, shedding light on a notable surge in demand for reverse mortgages in Australia.

The group reported a 20.7 per cent increase within the year, taking the total value to $1.54 billion, up $263.5 million.

According to the latest Intergenerational Report Australians are expected to live longer and remain healthier to an older age, putting an increased burden on spending for longer.

Given the ageing population, customers are resorting to reverse mortgages to secure funds for essential home improvements, moderate lifestyle enhancements, and improved cash flow management, according to Heartland's latest results.

General manager of reverse mortgages at Heartland Finance, Sharon Yardley, said that this growth is partly attributed to the mounting cost of living and the fiscal constraints faced by the older demographic within the current economic climate.

Ms Yardley noted that while a majority of Australians prefer ageing in their homes, many struggle to finance the necessary home modifications required for comfortable ageing in place.

As such, she said home improvements remain “the most common use of a reverse mortgages” , with 57 per cent using it for this purpose in FY23.

Moreover, she highlighted a surge in customers utilising reverse mortgages as supplementary income, rising from 16 per cent in FY21 to 38 per cent in FY23.

The results also noted, after consecutive cash rate hikes and successive house price reductions, the average weighted loan-to-value ratio (LVR) for Australia elevated to 21.5 per cent (up from 20.5 per cent in June 2022).

Overall, the results revealed a 0.8 per cent increase in net profit after tax, amounting to $95.9 million.

The group’s market share for its reverse mortgage operations in Australia stands at 38.4 per cent (as of March 2023), up from the previous year’s 33.1 per cent.

This positions Heartland “as the largest active provider of reverse mortgages in Australia”.

“We’re really proud to have been able to support more than 26,000 Australians to live a more comfortable retirement since 2004,” Ms Yardley said.

“Our Reverse Mortgage is designed to give customers choice in their retirement. Whether that means being able to make improvements to their home or to cover additional ongoing expenses to increase their quality of life.”

Looking ahead, the group aims to capitalise on the surging demand brought about by the ageing population to further boost its market share.

Furthermore, Heartland remains steadfast in its expansion efforts within Australia, which include strengthening its existing Livestock Finance business (StockCo Australia) and actively exploring avenues to amplify Heartland’s ‘best or only’ strategy within the country.

The acquisition of Challenger Bank remains on the horizon, subject to approvals from the Reserve Bank of New Zealand (RBNZ) and APRA.

The lender highlighted the strategic benefits of acquiring Challenger Bank, including access to robust funding sources to facilitate growth in Australian reverse mortgages and livestock finance.

The acquisition is poised to provide a springboard for sustainable expansion of existing portfolios in Australia through access to retail deposits.

[Related: Heartland to acquire Challenger Bank]