How reverse mortgages boost retirement living

Heartland Reverse Mortgages general manager Sharon Yardley explains how Australia’s ageing population is dealing with a cost of living crisis by looking more and more to reverse mortgages as a suitable financial option. Yardley also discusses how brokers can benefit by diversifying into reverse mortgages, and Heartland’s investment in technology to streamline the lending experience for brokers.

Heartland Reverse Mortgages is the market leader in reverse mortgages and was an excellence awardee in the Non-Bank of the Year category at the Australian Mortgage Awards 2023 – the fourth year running the company has been a finalist for this award.

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Kyie Speer  00:00:08  Hello and welcome to MPA TV. I'm Kylie Speer and my guest today is Sharon Yardley, General Manager Heartland reverse mortgages. Heartland Reverse Mortgages is an excellence awardee  Non-Bank of the Year at the 2023 Australian Mortgage Awards for the fourth year running. Welcome to you, Sharon. Congratulations. And thank you so much for joining us today.

Sharon Yardley  00:00:30 Thank you, Kylie. And thank you to MPA for the award again and for having us today. 

Kylie Speer  00:00:35 Well, firstly, Sharon, what are reverse mortgages? And what data do you have on the growth of this market?  

Sharon Yardley  00:00:43 Great question, Kylie. So look, a reverse mortgage is just like a normal home loan, but designed for the needs of people 60 And over, the big difference is that no regular loan repayments are required. Instead, the interest is added on to the loan, also called compounding interest, with the total loan only payable when the last person listed on the blown moves out of the property, usually when they move into long term care, or pass away. You can live in your home for as long as you choose. And you can also make voluntary repayments whenever you want to. Look it is a market that's continuing to grow and has a massive uptake in Australia. In recent years, we have seen a big growth in Heartland in our product offering, we have more than 8700 loans currently on offer. We have a loan book of over $1.5 billion. And we've been around since 2004. So we're celebrating our 20th year this year. In the past five years, our compound annual growth rate is 22.8%. And it's not just about our company, it's about the market opportunity for everybody. So the proportion of Australian population aged 65 and over is expected to reach 21% of our population by 2041. And the addressable market for reverse mortgages is estimated to be between 10 to $15 billion and surpass 50 billion by 2031. 

Kylie Speer  00:02:17 Why are reverse mortgages proving popular with borrowers? 

Sharon Yardley  00:02:22 We have an aging population. So there is a market out there for our apps, I think is the first important thing clearly. And on top of that, we have more and more people entering retirement, still in debt, still having mortgages, still having things to repay. And due to us living longer, we're spending longer and more in retirement. And that's eating into our savings. It's eating into our super and there are significant cost of living increases over time, just like we're experiencing at the moment. Look combined with the preference of people wanting to age in place, and we know people are happier, healthier and live longer by aging in place. It means that we've just seen a continuing increase in interest in uptake for reverse mortgages, particularly in our offering but in Australia, the people who are asset rich, cash poor but want to remain in their own home. Other reasons we also say of people taking up reverse mortgages, including includes home improvements. That is our top line purpose and it has been our top loan purpose since we started in 2004. Upgrading or repairing a car at income stream topping up that ongoing income or just wanting to live a comfortable retirement going on a holiday Aging in Place supporting aged care. There's lots of things you can use a reverse mortgage for to help live a more comfortable retirement. And as I mentioned before debt consolidation and home improvement are our two top purposes. Over 50% of Heartland loans are used for home improvements, and over 50% The debt consolidation. And on top of that 93% of respondents in our last customer survey said they believe the cost of living in Australia is putting a strain on their budget. And 86% say that the age pension does not provide enough for them to live the retirement they deserve. I mean, we've seen 38% of Heartland loans using a reverse mortgage for ongoing income last financial year. And that is up 15% from financial year 22. And we have supported research from RMIT University. And it shows almost 90% of senior Australians want to remain in their own home. But 29% are not able to afford the changes in their home that they need to age in place. There's such a massive opportunity for reverse mortgages in Australia and it really does help people live a more comfortable retirement on the Buying Tips. 

Kylie Speer  00:05:02 Sharon, how can brokers get involved in this market? And how will it benefit their business? 

Sharon Yardley  00:05:08 Well, I mean, the first way they can get involved in the market is become accredited, add a reverse mortgage to your product offering, because we have more than 20,000 people turning 65 in Australia, every single year. diversifying your business by adding a reverse mortgage to your product range to offer a full range of service means that as your clients get older, you can assist them with a reverse mortgage, as your clients, parents may need help or assistance, you can provide that offering adding referrals and a full string of bow and offerings to your quiver, it's really, really a great time for brokers to get into reverse mortgages, if they haven't already, and really ensures that they can provide a full product and service offering to their customers and their client base. And you can get some great referrals out of it as well. I mean, the projected growth of the equity release market globally is set to triple in the next 10 years. Getting on board now we'll just see you ensure that you're at the beginning of that of the of a business that will just continue to increase and continue to be able to assist customers in terms of how Heartland can help you. I mean, look at reverse mortgage is arguably one of the most heavily regulated consumer finance products in Australia, we have an accreditation process to make sure that you know and understand through our training, what a reverse mortgage is and how to offer it compliantly. On top of that, as part of our application, every single application, we have a disclosure that goes through step by step the important things you need to speak to a customer about, we don't expect everybody to know everything about these products. We're here to help. And we're here to help brokers, we're here to help them build their business and be able to add this product to their set, because there is such an opportunity and there are lots of Australians now and in the future that will need the help of brokers and the help of Heartland to ensure that they can live that comfortable retirement. 

Kylie Speer  00:07:24 How has Heartland built its value proposition as the leading provider of reverse mortgages? 

Sharon Yardley  00:07:31 Well, on top of that accreditation I spoke about and our broker disclosure. As a specialist, Heartland understands the needs of senior Australians, our product is award winning and market leading. We've helped over 27,000 Seniors release equity from their home, we have a flexible, adaptable product, really strong service from specialists who are knowledgeable, committed and really support the broker channel and build a connection with customers. Look, that's what's helped us to maintain our position as the market leader, but also help support brokers help support brokers with the product, the service and the offering that helps older people in Australia. 

Kylie Speer  00:08:16 And finally, Sharon, technology is crucial to the customer experience. What can you tell us about Heartland online portal and new mobile lending app? 

Sharon Yardley  00:08:27 Absolutely. And that is another way we've invested and provide value to our brokers. So we do have a broker portal where it has all the tools and resources you need to put through an application to become accredited, and to provide additional content, material and support to help you with your clients or your reverse mortgage applications. On top of that you can submit loans electronically through our broker portal. And it means that you don't have to have have a paper form. You don't have to scan something in, you can do it directly on our broker portal on our website and love that application digitally. On top of that we have launched a mobile app for customers. Originally in 2022, it was set up to check account details and balances. But in the middle of last year, we enhanced it. So it means customers can access that loan on the go. As well as viewing their details and balances and transaction history. They can also apply for their cash reserve request they redraw and and make sure that they understand things like what the interest rate currently is on their loan and how the loan is changing over time. We've designed it to be really user friendly and intuitive. Nice, clean and simple. So it's really easy to navigate and helps customers have a frictionless digital experience. And look we haven't had the app for very long, but it's the uptake has been really high with over 2800 Customers requesting access Since we launched 

Kylie Speer  00:10:02 Well congratulations once again and thank you so much for your time today. Sharon, it was lovely speaking with you. 

Sharon Yardley  00:10:09 Thank you, Kylie. And I really appreciate you taking the time again and have a great day. 

Kylie Speer  00:10:15 And thank you, of course to our viewers for watching the latest episode of MPA TV. We look forward to seeing you again soon.