Reverse mortgages up 20% in 1H23: Heartland

Heartland Group Holdings Limited’s (Heartland) Australian reverse mortgages receivables increased by $128 million (19.9 per cent) to $1.4 billion during the first half of the financial year.

Heartland attributes this increase to a variety of reasons such as increased debt consolidation and cost-of-living pressures; customers looking to enjoy their retirements with modest spending on the heels of the relaxation of COVID-19 lockdowns; and targeted marketing to existing and new customers to increase uptake/interest during key seasonal points in the year.

Speaking to Mortgage Business, Heartland senior finance head of operations, risk and compliance, Sharon Yardley, stated that reverse mortgages remained resilient to the current economic conditions.

“During economic difficulties, reverse mortgages are one of those businesses where can you still help customers and it is a very useful product to have in a diversified portfolio,” Ms Yardley said.

Ms Yardley added that there is a growing acceptance of using reverse mortgages for people to age in place.

“Instead of people downsizing or moving out of their community, they’re able to access a reverse mortgage to help ease the cost of living and be able to make home improvements so they can age in place and make it more retirement friendly,” Ms Yardley said.

“People are struggling with the cost of living need help to make ends meet and want to stay in their own home where they’re happier, healthier, and have close family memories and community connections and that’s what a reverse mortgage can do for them.”

Ms Yardley further stated that the number of people using reverse mortgages as a source of ongoing income almost doubled by the end of financial year 2022 when compared to 2021, rising from 16 per cent to 31 per cent.

Commenting on the Australian government incentivising retirees to downsize, Ms Yardley stated it's important for Australians to have options as they age. 

"We've sponsored research with RMIT University and the studies have shown that these people are happier and healthier to age in a place where they are as long as they can afford to do so and make the change to the home that they want." 

However, Heartland’s personal lending receivables (loans originated directly through Heartland Bank and originated by Harmoney in Australia and NZ) decreased by $2.3 million (6.9 per cent) to $62.8 million, with Harmoney receivables dropping by $11.4 million (73.3 per cent).

This decrease was made up of the Harmoney NZ channel dropping by 73.6 per cent ($6.8 million) to $11.6 million along with a decrease in the Australian channel, which fell by 72.8 per cent ($4.6 million) to $7.9 million.

In addition, the group’s motor finance receivables increased 10.9 per cent ($75.9 million) to $1.46 billion due to early repayments slowing down as customers were less inclined to top up their mortgages as interest rates rose or refinance at higher rates.

Looking ahead, the group intends to focus on expanding in Australia by growing its existing Australian reverse mortgages business, growing Livestock Finance following the recent acquisition of StockCo Australia and seeking other opportunities to expand the group's 'best or only' strategy. 

With the acquisition of Challenger Bank, Heartland looks to further fuel expansion into Australia through access to retail deposits and by developing opportunities for expansion into new product areas.

Since Challenger Bank is an established authorised deposit-taking institution (ADI), Heartland benefits from: access to an efficient pool of funding to support ongoing growth; potential uplift in margins, to the point where retail funding rates are less than wholesale rates and; a platform for the group to extend its 'best or only' strategy. 

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