Heartland's reverse mortgage growth slows: Online home loans closed

Growth in Heartland Group’s reverse mortgages continues at double-digit rates but has slowed from the 2024 financial year from 20% to 15% in the six months ended December.

Heartland’s New Zealand reverse mortgage portfolio rose by $82 million, or 15.3%, to $1.15 billion in the six months while net operating income rose 22.3% to $29.2 million.

The main reasons for borrowing remain home improvements, debt consolidation and easing of living expenses, the company says.

It is forecasting that growth will fall a little to 15% in the second half but that it will then pick up to 15.7% for the year ending June 2026.

Heartland says it will be launching a new product designed to allow people to access the equity in their home to enable the purchase of a retirement village property.

Non-performing loans were less than 0.5% of the portfolio but the average loan-to-valuation ratio (LVR) has crept up to 24.6% from 23.5% at June 30 last year and from 21.3% at June 30, 2023.

The number of loans with LVRs above 75% rose to six from two at June 30 and zero before that while the average age of the youngest borrower among new customers fell to 73 from 77.

However, the average initial LVR fell to 8.9% from 9.1% at June 30 last year and 9.8% in June 2023.

The amount of originations rose by $9.8 million to $106 million compared with the previous first half while repayments at $80 million were up by $22.5 million on the previous first-half.

Heartland’s compound annual growth rate from the portfolio eased to 17.3% from 17.5% at June 30 but was up from 16.4% at June 30, 2023.

The Australian reverse mortgage book grew by $138 million to $1.97 billion in the latest six months.

The group has decided to give up on its digital-only home loans and will wind down the portfolio as loans are repaid – the book fell to $246.5 million at Dec 31 from $311 million at June 30 and Heartland expects 80% will have been repaid by the end of this calendar year.

As foreshadowed last week, Heartland’s net profit for the six months fell 90.4% to $3.6 million compared with its previous first-half net profit of $37.6 million with it writing off $49.6 million of impairments.