Property boom accelerating reverse mortgage repayments

Heartland posted its 2021 financial year results, revealing a net profit of NZ$87 million, up by 20.9 per cent year-on-year.

The group generated 15.8 per cent more in net operating income, recording NZ$251.2 million.

The Australian reverse mortgage business had contributed NZ$36.2 million to Heartland’s net operating income, 5.5 per cent more than in FY20.

The segment’s receivables were up by 9.5 per cent to $1 billion, although Heartland recorded historically high repayments amid a buoyant property market, seniors moving in with family and pooling financial resources, and a move to sell higher-value homes and downsize.

Repayments totalled at $154 million for the year, 39 per cent more than FY20, while the repayment rate sat at 16.9 per cent, versus 14.6 per cent the year before.

Similarly, the New Zealand reverse mortgage arm saw a 43 per cent surge in repayments, which affected its receivables growth.

But repayments slowed in the final quarter as property sales were restricted by lockdowns.

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Heartland Australia also saw a drop in reverse mortgage originations during the year, down by $15 million (8 per cent) to $189 million.

The company noted it had been boosted by mortgage aggregators across Australia, including AFG, Choice Aggregation and PLAN Australia.

Heartland has signalled expansion ambitions for its product offerings in Australia, as the population ages – with plans to adjust the age requirements for its reverse mortgage to enable access to funds sooner.

The group had experienced subdued growth in the first half of the year, through reduced business and consumer confidence. The second half showed higher levels of growth across most portfolios.

Harmoney and Heartland’s other personal lending businesses produced $16.6 million, down 22.4 per cent compared with FY22.