Reverse Mortgages and COVID-19

Strong growth in Reverse Mortgages expected to continue

Once again, Reverse Mortgages performed well in the financial year, showing strong growth across both New Zealand and Australia. Many New Zealanders and Australians are retiring without sufficient financial means to support the lifestyle they want to live and we expect this trend to continue.

It’s no surprise that the latest Massey University retirement expenditure report found that most New Zealanders aspire to a better standard of living in retirement than can be supported by NZ Superannuation alone 1.

Accordingly, we expect growth in Reverse Mortgages to continue, although it is likely that the most common uses of a Reverse Mortgage may change. For example, we have seen a decline in overseas travel and higher rates of debt consolidation.

Heartland continues to be the market leader

During the course of the financial year, one competitor re-commenced the promotion of a Reverse Mortgage product in New Zealand. However, our learnings from the Australian market have shown that some competition can help to increase awareness and acceptance of the product amongst the target market.

We believe that our market-leading position in New Zealand will continue despite this competition as a result of our strong experience in the Reserve Mortgage market and our dedicated and knowledgeable team who deliver outstanding service and provide a streamlined process for our customers.

Heartland Seniors Finance in Australia also continues to be the leading originator of Reverse Mortgages in Australia, with our 12-month market share increasing from 21%2 to 26%3.

“For many retirees, COVID-19 has highlighted the importance of their home as it connects them to their family, friends and community.”

 The impacts of COVID-19

There is no ‘one size fits all’ approach to funding retirement. Each person has a different set of financial, social and family circumstances and differing lifestyle choices. A Reverse Mortgage is simply another option to enable retirees to make their chosen lifestyle a reality.

We believe that the ability to provide Reverse Mortgages to retirees will be more important than ever given the impacts of COVID-19, for example:

– Saving for retirement will inevitably become a lower priority for those facing redundancy or salary cuts. For many, the focus must shift to making ends meet on a day-to-day basis, with retirement savings taking a back seat. Those who were already under-prepared for retirement will be most significantly affected.

– The current low interest rate environment will mean less income for retirees who are heavily reliant on interest from term deposits to fund their retirement. Again, this may result in the need to seek other options to support their retirement income.

For many retirees, COVID-19 has highlighted the importance of their home as it connects them to their family, friends and community. Many are looking at a Reverse Mortgage to release equity rather than the traditional method of downsizing.

Heartland is proud to be able to provide another alternative to help New Zealanders and Australians live a more comfortable retirement despite the current economic environment brought about by the COVID-19 pandemic.

1 New Zealand Retirement Expenditure Guidelines 2019 https://www.massey.ac.nz/shadomx/apps/fms/fmsdownload.cfm?file_

uuid=18330758-8D36-4EF6A79B-92C86889BFAB

2 Based on APRA ADI Property Exposure combined with Heartland Seniors Finance data as at 31 March 2019.

3 Based on APRA ADI Property Exposure combined with Heartland Seniors Finance data as at 31 March 2020.