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Debt consolidation helps drive Heartland reverse mortgage business

Heartland Bank debt consolidation is one of the reasons behind the growing loan balances in its New Zealand reverse mortgage book.

Tuesday, August 29th 2023, 1:31PM

by Jenny Ruth

The average reverse mortgage balance was $128,938 at June 30, up from $116,728 a year earlier, and the average loan-to-valuation ratio (LVR) rose to 21.3% compared with 18.3% a year ago.

But the average LVR when a reverse mortgage is taken out has dropped slightly to 9.8% from 10%.

“We've seen an increase in using reverse mortgages to help consolidate and manage debt,” says head of retail Keira Billot.

Customers are using Heartland's facility to repay credit cards and personal loans, which typically have higher interest rates, and to avoid having to make regular repayments on such loans, Billot says.

However, the number one reason why people take out reverse mortgages is to make home improvements to make it possible to remain in their homes as they age, she says.

While the average LVR has risen, “our LVRs remain conservative, and that's not unexpected due to what we're seeing in the market.”

Heartland group chief executive Jeff Greenslade told analysts that reverse mortgage customers probably do have “a backstop level of equity” that they want to maintain in their homes.

However, repayments in the current environment have been falling, in contrast to when house prices in Melbourne and Sydney were racing higher, Heartland's repayments increased.

Heartland noted that its online-only mainstream mortgage business managed to retain more than 90% of customers when their fixed-rate terms came up for renewal.

The offering is restricted to owner-occupiers with at least 20% equity in their home or at least a 20% deposit to buy a home.

While Heartland aims to offer near the lowest interest rates available in the market, there have been brief periods over the past year when mainstream bank rates have been lower.

It also has to battle against the large incentives mainstream banks are offering – for example, ANZ Bank is currently offering first-home buyers $5,000 while the Co-operative bank is offering up to $20,000, or 1% of the loan value, on loans above $250,000.

Bank chief executive Leanne Lazarus says her bank won't be introducing such incentives.

“The reason for that is our pricing is extremely transparent and very competitive,” Lazarus says.

“We aim to have low on-boarding costs and therefore we can pass on those competitive rates to customers.”

Billot says her bank “tries to keep it as simple as possible” because that reduces the cost of origination.

However, Heartland does review its conditions and recently extended eligibility to terraced houses, which are becoming more common in NZ, she says.

Tags: Heartland

« [GRTV] Advisers can thriveHeartland's reverse mortgages grow at more than 20% »

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.14 6.79 6.65
ASB Bank 8.64 7.14 6.75 6.39
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.14 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.74 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.89 6.55 6.35
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.69 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.74 7.35 6.99
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.65 7.25 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 8.74 7.74 7.09 6.95
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 7.14 6.49 6.35
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.14 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 7.79 7.55 7.45
TSB Special 8.64 6.99 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - 6.55 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Lender Flt 1yr 2yr 3yr
Westpac 8.64 ▼7.49 7.35 6.99
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - ▼6.89 6.75 6.39
Median 8.64 7.14 6.82 6.65

Last updated: 11 July 2024 1:26pm

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