Reverse mortgage lending in the year ended June 30 in NZ grew by $165 million to $1.23 billion while Australian lending was up A$309 million to A$1.98 billion.
The NZ bank’s chief executive Leanne Lazarus says the portfolio is “exceptionally high quality and well-secured” and that she expects growth to step up to 18% in the current financial year.
Lazarus says strong brand awareness has helped the reverse mortgage business grow and that lead generation is currently “extremely strong.”
“We’re starting to see increased levels of applications coming through.”
Net interest income from the portfolio was up 18.5% to $58.3 million in the latest year.
Heartland introduced electronic valuations in the year, reducing average settlement times by about five days, and by the end of the financial year about 50% of cash drawdown requests were processed online.
Lazarus says Heartland received strong demand for its new retirement village access loans introduced in March this year.
Michelle Winzer, chief executive of the Australian bank, says growth in the Australian reverse mortgage business picked up to 20.6% in the second half.
Improvements in reverse mortgage broker origination and training led to a 74% reduction in application turnaround times, Winzer says.
Other improvements and the removal of duplication mean overall times from application to service fell from more than 60 days to more than 20 days, she says.
The company has added 300 new accredited brokers and a new aggregator has signed up with the Australian bank, she says.
Heartland’s net profit for the year ended June fell 48% to $38.8 million, reflecting a 54.3% jump in charges against profit for bad debts to $71.6 million with much of the increase reflecting bad debts in the NZ motor finance division.
The costs of integrating the Australian bank, purchased in April 2024, also dragged down profit with operating expenses jumping 38% to $192.5 million.
As previously reported, Heartland decided to cease its digital online-only home loan offering and that portfolio fell to $171.7 million at June 30 from $252.4 million a year earlier and group chief executive Andrew Dixson says he expects another $90 million reduction by December.
The NZ Reverse mortgage business has a current weighted average loan-to-valuation ratio (LVR) of 25.3% and a weighted average initial LVR of 8.11%.
The average age of the borrowers is 73 while the average initial loan amount is $78,000 and the average repayment term is six years. About 81% of repayments are voluntary.
Nearly 60% of loans are used for home improvements while about 40% are used for debt consolidation.
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