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Heartland’s lending growth slows, as credit reforms pinch

Despite announcing “pleasing” growth in reverse mortgage lending and home loans for 1H 2022, Heartland predicts tightening credit regulations will continue to impact lending volumes in 2022.

The reverse mortgage provider recorded growth in home loan applications up 29.2 per cent to 7,840, for the six month ended 31 December 2021, driven by rising interest rates that “motivated” many home loan borrowers to review their mortgage providers.

Meanwhile its home loan platform, which launched in October 2020, reached $218.5 million across 422 customers as at 31 January 2022, flagging the company’s “ambition” to hit the $1 billion mark by end of the 2023 financial year.

However, growth in its online home loans slowed in January and February 2022, on the back of changes in credit amendments in Australia and New Zealand, which it said had the potential to impact the growth rate for the remainder of the six-month period ending 30 June 2022.

The report said the introduction of changes to two Credit Contracts and Consumer Finance Acts and the “interrogation” of activity in bank statements needed to satisfy these new standards, have had an “industry-wide” impact resulting in reduced lending volumes.

But, the drop in online home loans is being partially offset by growth in other areas, such as reverse mortgages.

Overall its first-half performance of 2022 recorded a net profit after tax of $47.5 million, an increase of $3.4 million compared with the same period last year (1H 2021), with a rate of growth in lending up 13.9 per cent.

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Australian reverse mortgages

A buoyant property market and repayments below long-term averages in December, contributed towards “higher than expected” new lending, with reverse mortgages in Australia up $19 million, an increase of 4.7 per cent when compared to 1H 2021.

The direct channel saw an 8 per cent increase in new business compared with 1H 2021, while the intermediary channel increased 18 per cent during the same period.

Growth in Australia continues to be a strategic priority, as the company explores potential acquisitions opportunities, and continues to focus on its digitisation and reverse mortgage lending.

For example, the launch of a new “streamlined” loan, Express Reverse Mortgages, in January 2022 now offers a “market-leading” variable interest rate targeting people between 60 and 70.

In addition, a new mobile app is planned to support reverse mortgage customers in Australia, as its market share in reverse mortgages in Australia increased from 28 per cent to 31 per cent.

Heartland said its reverse mortgage lending in Australia continues to engage with the broker channel, including partnerships with Australian Finance Group, Choice Aggregation and PLAN Australia, and being added to FAST Aggregation’s lender panel in July 2021.

Meanwhile, its asset finance net operating income was $15.8 million, up $2.4 million compared with 1H 2021, while personal lending in both NZ and Australia portfolios contracted as a result of “high repayments” combined with limited growth.

Despite uncertainty around COVID-19, and economic pressures, Heartland said the pandemic had not disrupted business-as-usual activity and 1H 2022 had “exceeded expectations”.

[Related: Heartland raises LVR limits for reverse mortgages]

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