Heartland Bank saw mortgage loan repayments rise 43% over the past year as customers took advantage of the tumultuous home market to sell and reap profits



Heartland Bank saw reverse mortgage repayments increase 43% in New Zealand over the past fiscal year as its clients took advantage of the steamy home market to sell their properties and generate cash income.

But although Heartland has been described as “increased” repayments (valued at $ 93 million), Heartland had a record year for new reverse mortgage business in New Zealand ($ 102 million, up over 30% from last year) . It increased the size of its reverse mortgage claims here by 7.4% to $ 602 million.

The parent company of Heartland Bank Heartland Group Holdings announced an after-tax profit of $ 87 million for June 2021, after a very strong second half of the year, almost 21% more than in the previous year. The company is targeting full year earnings of $ 93 million to $ 96 million in 2022.

Chris Flood, Chairman of the Board of Directors of Heartland Bank, said the increased mortgage repayments in New Zealand were “a product of our senior borrowers taking the opportunity to sell their homes at levels or prices they were two or three years ago thought they were unavailable “.

“They will then have more options to fund their next phase of retirement in other ways, either by moving to a village or moving to a smaller but better quality location outside of their original home,” he said.

“That happened in Australia too, but not quite as much as we did here in New Zealand.”

So is the amount of NZ repayments a problem or a problem?

“No, I don’t think so – the 7.4% growth is still very solid and the pipeline continues to build,” said Flood.

“… The baby boomer cohort is now really starting to move into an area where we will be of interest to them. That ranges from 57 to 75 – obviously a population bubble – and our average customer is 72.

A solid pipeline

“So we believe there will be a really solid pipeline of potential borrowers who are asset rich and cash poor – especially given house price inflation in recent years – looking to access some of that equity and live a better retirement really love the product, “said Flood.

Regarding the upcoming reverse mortgage business, Flood said Heartland has “pipelines at record levels.”

“The last three months have been at our peak in terms of new lending … This lockdown will slow things down.”

During the Level 4 lockdown last year, Flood said, Heartland observed that the normal regular monthly borrowings of customers on reverse mortgage loans decreased because they were unable to spend. The execution of new loans had slowed. And getting reviews was a problem.

“But what we noticed – and it was only a week ago – is that the actual volume of inquiries and the number of calls or packages we send to customers to give them more information has not really decreased in this lockdown Has.”

Heartland attaches great importance to the development of its digital platform. And it is now using this to specifically address the normal mortgage market. It has aggressively cut rates this year. In particular, the refinancing business, which involves loans with a loan-to-value ratio of less than 80% that can easily be processed online.

Flood says approximately $ 5 billion of the $ 9 billion monthly loan refinancing would fit into Heartland’s target loan type.

“I’m really excited. As the CEO of a small bank here in New Zealand, offering the prices we have compared to the rest of the market, this was not something I would have expected three or four years ago and it is really the evolution of our digital platforms that is giving us the Have given the opportunity to do so.

“When we first hit the market, our philosophy was to be in areas where we could be ‘best or just’ – so reverse mortgages and motoring were clearly two areas that we paid a lot of attention to . We have our asset finance book as well. And we really see this growing at quite a pace. I think the prospects for the coming year are good. But now we see that not only can we have the best or only product, but possibly the best delivery platform. . “

Regarding the $ 5 billion monthly refinanced mortgages Heartland would be “interested” in, Flood said they need “only a small percentage” of these customers to evaluate an online listing “It’s smooth and takes a lot less time that doesn’t require you to move all of your facilities from one bank to another, just simply and efficiently get the home loan you want at the rate you want”.

Heavy lifting

“… technology or the borrower does most of the work. We’re now digitizing the back end of our platforms so we focused on developing a front end that would make it easy for a customer to come to us and get approved – but we’ve had manual processes across the company for that we had to hire people for – that has now been replaced by technology and end-to-end processes. So it’s a pretty exciting offer.

“… So we only need a small fraction of that $ 5 billion – considering Heartland is a $ 5 billion bank – to evaluate this offer to make it meaningful to us.”

Flood said the bank “saw many inquiries” and approved “hundreds of millions of dollars” of new loans.

“… What we’re seeing are two things: our pipeline of approved and customer-accepted facilities is increasing – and then the amount of monthly drawings we are increasing. Prior to this lockdown, we were expecting draws of around $ 16 million to $ 17 million.” It was $ 12-13 million the month before, and our pipeline was suggesting the next month would be up again, so we just need to see how that plays out in relation to a Level 4 lockdown across the country . But the signs are all very positive. “

Late last year, Heartland announced that the company is considering the option of moving its auto finance business as a standalone arm.

When asked if it was still being considered, Flood said, “No decisions have been made on this.

“Can split the automotive business if we want”

“But what we’ve done is build the business so that if we choose to, we can split it up.

“That means having stand-alone systems and a dedicated workforce, and one of the benefits that I think Heartland has always had is that we have been very narrow in what we offer, so we have people who are very good at car loans We have people who are very good at selling reverse mortgages to borrowers, and we do the same with our property and livestock financing offers, for example.

“So we started with a dedicated resource in certain areas, now we’re making sure we have stand-alone systems and can work that way – should we choose.”

Referring to the Heartland Group’s overall results for the June 2021 year, Flood said, “It was a very good second half for Heartland”.

“We have built on that and of course we are concentrating on growth in terms of profitability and ROE [return on equity] and in terms of the balance sheet.

“… So this ongoing boring trend that Heartland is introducing, which is 10% growth across the board, will continue next year.”

* This article was first published in our paid subscriber email. More information and how to subscribe can be found here.



Comments are closed.