Reverse mortgages take a prominent position in Heartland’s lending strategy as adviser involvement grows and the bank prepares for a potential transformation
Heartland is targeting another year of double-digit reverse mortgage growth as it prepares for a potentially much larger role in New Zealand banking through its proposed merger with TSB.
The specialist lender’s reverse mortgage receivables increased by $207.4 million, or 16.8%, to $1,440.7 million in New Zealand during the financial year to June 30. Across the Tasman, Heartland Bank Australia recorded growth of 19.7%, taking its reverse mortgage receivables to AU$2,371.1 million.
And the lender is now looking for more than 18% of growth in both markets during FY2027, making reverse mortgages one of the clearest growth engines within the group.
At the same time, Heartland is progressing its proposed $620 million acquisition of TSB. If approved, the two banks would merge to create TSB Heartland Bank, with approximately $15 billion in New Zealand assets.
Together, the two developments point to a significant period of change for Heartland – continued expansion in its specialist lending products alongside an attempt to gain the funding, infrastructure and reach of a larger full-service bank.
Adviser referrals gain momentum
In New Zealand, Will White, General Manager Reverse Mortgages and Retail attributes the momentum in reverse mortgages partly to greater market awareness, a stronger regional presence and improvements to its product processes. He also says the bank’s adviser network is also becoming an increasingly important source of business.
“Our trusted partner network of financial and mortgage advisors has played an important role, increasing from 9% of overall settlements in January, to 19% in June." And Heartland has expanded its support for the channel as it looks to maintain that momentum.
“We now have 6 business development managers across the country, who are focusing on helping add reverse mortgages to their toolkit,” White says. “Many successful referrers are recognising that by having a strong understanding of the product and who it can help, it leads naturally to referrals.
“Growth will also be underpinned by our tech investment programme simplifying and modernising our technology, to enable simpler digital journeys for customers and faster lending decisions.”
Heartland launched reverse mortgages on its new technology platform during FY2026 as part of a wider transformation programme across its New Zealand and Australian businesses. The longer-term goal is to increase automation, improve the experience for customers and intermediaries, and support portfolio growth without a corresponding rise in operating costs.
Is home equity being overlooked?
The rising volumes also raise a wider question for the advice sector – whether home equity is being considered often enough as part of retirement planning.
White believes some advisers may still be overlooking the role a reverse mortgage can play.
“I think this is perhaps due to a lack of awareness of what the product can offer.
“But managed well, a reverse mortgage can serve as a temporary bridge between life stages and provide the necessary time and space to make decisions with more clarity.”
Because of the loan’s protections, flexibility and lack of repayments, the interest rate on a reverse mortgage is higher than a standard home loan but typically lower than credit cards and personal loans. So drawing funds gradually rather than taking a lump sum generally results in a lower total balance over time.
But while White says this cost needs to be considered alongside the product’s flexibility and protections, the reality is that the average term of a Heartland Bank reverse mortgage is 6.41 years, with an average age of the youngest borrower at 73.
For advisers, that reinforces the importance of assessing the client’s wider circumstances rather than viewing equity release as either a permanent solution or a purely financial calculation.
“That said, each scenario is different and we provide specific forecasts for each person’s situation,” says White.
“Armed with all the information the client is then in a much stronger position to make an informed decision. It is also important to remember that not all decisions at this stage of life are necessarily purely financial decisions. They are often driven by family, lifestyle, location, and quality of life considerations.”
TSB deal could extend Heartland’s reach
Heartland’s reverse mortgage ambitions are now sitting alongside the proposed TSB transaction, which could substantially change the scale and shape of its New Zealand operations.
Under the proposal, Heartland would acquire all TSB shares from Toi Foundation before merging TSB with Heartland Bank. The combined bank would bring together Heartland’s specialist lending products and TSB’s everyday banking, deposit and transactional capabilities.
Heartland Group Chief Executive Andrew Dixson says the proposal is intended to create a larger competitor in the New Zealand market.
“If the proposed merger proceeds, TSB Heartland Bank will be a New Zealand challenger bank of scale with a regional focus, increasing banking competition and choice for New Zealanders.
“By bringing together TSB’s everyday transactional banking capabilities with Heartland Bank’s specialist product expertise, we will create a full-service bank with the ability to serve customers through every life stage.”
The strategic appeal is clear. Heartland would gain access to a broader and potentially more cost-effective funding platform, while TSB would gain the specialist products that have been driving some of Heartland’s strongest growth.
Dixson says the merger would not mean moving away from the specialist areas on which Heartland has built its position.
“If the proposed merger proceeds, Heartland will retain its specialist product focus across New Zealand and Australia – in New Zealand, this will simply be enhanced by the addition of full-service banking capabilities. TSB Heartland Bank will be differentiated by its specialist products.
“Over time, and only once the proposed merger is completed, TSB Heartland Bank is expected to offer a broader range of banking products to meet customer needs throughout their financial lifecycle.”
The transaction remains subject to several conditions, including Heartland shareholder approval and the necessary New Zealand and Australian regulatory approvals.
With or without the merger, Heartland’s FY2026 figures show that reverse mortgages are no longer a peripheral part of its lending book. They are becoming central to its growth strategy – and potentially to the specialist identity of a much larger challenger bank.
