Love it, would be there in a heartbeat if I could.
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Love it, would be there in a heartbeat if I could.
Wow - fantastic! will definitely be witching myself at my next renewal.
Quote:
Heartland drops home loan rates to new lows
12/5/2021, 1:36 pm GENERALNZX/ASX release
12 May 2021
Heartland drops home loan rates to new lows: 1.85% p.a. 1-year fixed, 1.95% p.a. floating
Heartland Group Holdings Limited’s (Heartland Group) (NZX/ASX: HGH) subsidiary Heartland Bank Limited (Heartland Bank) (NZX: HBL) (together, Heartland) has disrupted the home loan market again, this time with the reduction of its 1-year fixed and floating term loan rates. This announcement comes shortly after Heartland broadened its mortgage offering with New Zealand’s lowest revolving credit facility rate.
The challenger bank now offers the following fixed and floating rates, which are each the lowest of their category:
1.85% p.a. 1-year fixed
2.35% p.a. 2-year fixed
2.45% p.a. 3-year fixed
1.95% p.a. floating term loan
2.35% p.a. floating revolving credit
In the quarter ended 31 March 2021, the fintech lender saw a 173% increase in average monthly drawdowns compared with the previous quarter ended 31 December 2020, and has received over 6,600 applications since re-entering the residential mortgage market in October 2020.
Heartland’s online process allows for a faster home loan approval than the traditional process with other lenders. Those who meet the eligibility criteria can fill out the digital application in minutes and get a decision online, with no need to make an appointment or arrange for someone to come to them.
“People shouldn’t need to pay so much for their mortgage,” explained Heartland Bank CEO Chris Flood. “Our approach to home loans is disrupting the traditional market in favour of a digital solution, one which can offer customers market-leading rates and time savings.”
Visit heartland.co.nz/home-loans to learn more about Heartland’s eligibility criteria.
Heartland Bank lending criteria, terms and conditions apply.
– ENDS –
The FINTECH lender
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Wonder how the vehicle part demerger progressing
Not sure what lending at this rate does to their net interest margin...but everyone else seems happy about it so lets all have a group hug, lay around and be happy https://www.bing.com/images/search?v...26pid%3DImgRaw
I think this is more of a marketshare grab Beagle.
There is usually a lot of friction involved in changing mortgage providers, so most do not do it for a small 0.1 or 0.2 difference in mortgage rate. However HGH is now 0.5 cheaper than the major banks on fixed rates, and a whopping 2.5 cheaper on floating rates!, and I think that sort of gap will shift a lot of people.
I really think this is a massive growth business for HGH - and it won't be too long before they have a mortgage book over $1 Billion.
Some positive coverage https://www.interest.co.nz/personal-...one-year-fixed
Quote:
As the winter real estate season approached and housing market activity starts to fall away, one bank is making a big play for the remaining home loans business.
Heartland Bank has cut its already low rates sharply.
It's core one-year fixed rate has been sliced to 1.85%, a -14 bps drop from what was already the lowest rate in the bank mortgage market.
And it has cut its already low 2.50% floating rate to 1.95%, a major -55 bps reduction.
Further it has cut -40 bps from its revolving credit rate, taking it down to 2.35%.
These are eye-catching changes.
That one year fixed rate is a full -40 bps lower than any of the major banks. It is also -34 bps lower than any other bank's one year 'special', and -24 bps below the Cooperative Bank's one year FHB 'special'.
It is easily the lowest one year rate from any institution, ever.
Heartland's 1.95% floating rate is also a market low, far lower than the 3.40% from Kiwibank, or the 2.25% on offer from KiwiSaver provider Simplicity for their members.
All part of the strategy of promoting themselves to the finance world as a FINTECH company ...rather than a finance company (and pretend bank)
FINTECHs rewarded with higher market multiples they say.
Just want to emphasise that Mortgages are a massive blue ocean for HGH now that it has entered.
The NZ mortgage market is now over $300 Billion in size, so having a target as low as 1% of that market would grow HGH significantly.
But is it actually good for HGH to go bigly into the ordinary mortgage market?
Might as well sell up and buy ANZ.
Does anyone know if Heartland does not give preferential access to the brokers analysts?
Exactly, clearasmud, they can still hit ~4% NIM with these rates, so go for gold I say. They are certainly making a big push with TV advertising, so I think they are pretty serious about grabbing a slice of the action.
I had a rant recently about a failed application online, but it transpired I made a mistake and checked something by accident...I was accepted in the end. But Kiwibank have me tied in for another 12 months, so I'm stuck there for now. One thing I found though, while on the face of it the Heartland rates look very competitive, they are a bit light on the cash incentive side of things compared with what I'm used to getting at Kiwibank at least (it's been 2 years though), so could be a case of horses for courses.
Didnt’t Snoopy once explain how lending at sub 2% can still give a NIM of 4% seeing intuitively it can’t be done.
You can't get a NIM of 4% but you can get a good margin on the capital needed to support the lending. If you make a 1% margin on the RBNZ/other borrowing financed bit and 2% on the equity financed bit the return on equity is 11% (if equity finances 10% of the lending). The lower you can get the equity supporting the loans, the higher the return on equity.
Pretty happy with HGH..one of my biggest holding. Reconk will hit $2 in coming reporting day
And refining some of the numbers, the Non-property investor residential mortgage loan has a risk weighting of 0.35 if the loan is current, has a <80% LVR and is to a residential owner occupier (HGH conditions?). While HGH may ultimately need a 16% capital adequacy ratio, the 0.35 weighting means if the book had no arrears, you could theoretically have equity financing 5.6% of the loans and the remaining 94.4% financed by borrowing. >15x leverage helps the maths.
RBNZ's funding for lending scheme should be available for up to half of all new eligible lending. This would mean half the financing needed for the new 1.85% loans could be sourced from RBNZ at the cash rate (0.25%). This would create a margin of 1.6% (not 1%) on this part of the financing structure.
These changes would improve the return on equity to a theoretical 25%+. Unfortunately income tax will lower this, as will any bad debts, commissions paid to brokers, any large sign-on legal fees subsidies and non-automated back-end processes. Assuming all these other bits are well managed it looks like this <2% lending could be nicely profitable.
I am a bit more weary about this growing emphasis on the mortgage market, in direct competition with the big boys. We have done very well for many years with our fringe products where the big boys have pretty much left us alone, reverse mortgages being a prime example.
Yes of course the RBNZ is currently providing some very cheap lending but going into the mortgage market boots & all has to be a long term strategy that will last well beyond the cheap funds from the RBNZ.
Harmoney has a $200m+ facility with Heartland coming soon:
https://www.nzx.com/announcements/372109
Still can't believe that Jeff came out with a profit upgrade. First one in 5 years (probably many more years than that)
Here's a table showing Jeff's 'managing profit' efforts over the last few years. No surprises / we always do what we will say we will do etc etc
Jeff will say Heartland's NPAT for year will be $86.4m - they'll report $93.1m with the covid overlay being released but Jeff will stress that that's not real and say actualy underlying earnings were $86.4m
Just like last year Jeff talked about the $78.9m rather than the reported $72.0m
Can't argue with that. He does what he says he is going to do. What it shows is a deep understanding of the business and its drivers. Either that or some "creative bookkeeping" through provisions.... Thanks for sharing.
Good profit in a low interest rate environment. Imagine how good it will be when they actually increase.
Hmm can Heartland run their own kiwisaver scheme or wouldn't it be worthwhile for them.
It is quite "interesting" how they can project forward a whole year ahead what the profit will be and more often than not get it pretty spot on. You could very easily be forgiven for thinking some variations in their bad and doubtful debts provisioning methodologies occur from one year to another to make the numbers fit which kind of makes me wonder why bother with such a modest forecast upgrade ? (Not that I am complaining, disc: I have truckloads). Anyway...in August 2021 when they report a profit we already know for FY21 we get to know what FY22's profit will be and that's pretty cool no matter how you slice and dice this.
The master of profit smoothing was Jack Welch at GE --- chart below proves that
Maybe Jeff learnt a few tricks from him.
Its actually a hard thing to do well because you need to remember whats in each little hidey hole - I've seen a few attempts at it fail big time
In GE's case Jack's successor had to unwind a few things
Some investors however do see 'smoothness' of earnings as a red flag
But I've long admired Jeff's ability at it
Yes quite a contrast to smooth or not to smooth
In a world full of rough seas smooth is a refreshing change. Huge ups and downs are no good for the heart rate, see 16 second mark https://www.youtube.com/watch?v=c8qBvw3ofyE
I like the boat but those conditions are for younger and keener blokes than me :eek2:
competition for HGH's Aust reverse mortgage business ... from the Federal govt, FFS.
https://www.servicesaustralia.gov.au...n-loans-scheme
at least they don't pay yet as a lump sum (yet!?)
actually you can now get lump sum advances from the Aust Federal govt: https://www.dss.gov.au/sites/default..._2021_1000.pdf
Your Australian budget reference says from 1st July 2022:
"From 1 July 2022, pending the passage of legislation, Pension Loans Scheme recipients will benefit from:
•a No Negative Equity Guarantee, which means recipients will never owe more than the value of the equity in the secured property, and
•access to capped advance payments."
"Recipients will be able to access up to two lump sum advances in any 12-month period, up to a total value of 50 per cent of the maximum annual rate of Age Pension. Based on current Age Pension rates, a single person would be able to receive lump sum payments of up to around $12,385 per year, while couples combined could receive up to around $18,670"
https://www.servicesaustralia.gov.au...ch-you-can-get
Looks like the Federal government interest rate for reverse mortgage borrowers is 4.5% compounding fortnightly.
This does look like serious competition for the 'Heartland Reverse Mortgage Business' in Australia!
SNOOPY
Good question
I think Jeff is really telling us that they will get to $86m (up from $79m last year ...without the covid delay.
In Jeff’s mind the covid overlay doesn’t really exist and is not ‘normal’
He’s basically saying that when he reports $93m (writing back the overlay) don’t use that number as real performance (like we didn’t really go from $72m to $93m)......esp in your valuation models ... and forecasts for F22 .....as our guidance would then show we not doing very well.
Like F22 guidance $94m looks good v $86m in F21 but terrible v $93m reported profit.
Jeff’s just educating you all to be real
Crown competition will be difficult to beat. Government and Reserve Bank policies have meant many regular folk are asset rich, with valuable homes, but financial assets/cash poor. It makes sense that they increase pensions by way of a loan instead of an outright benefit. As it is based on how much real estate equity the elderly recipient has, This scheme is a hybrid means tested pension/estate duty. I imagine the NZ Government is closely following what is happening in Australia as many NZ pensioners are asset rich but cash poor too.
The reverse mortgage product has been highly successful for HGH and I must say I was shocked when I saw the AFR article pop up on facebook talking about how retirees can go directly to the source and skip the middleman (HGH).
If NZ govt follows suit I wonder how much impact it will have on HGH earnings.
Sheesh what is next.. may as well open the government or better yet RBNZ tap for first home buyers. Actually who needs banks? :eek2:
i mean its okay if you write an app and Microsoft or Apple consume you, at least they pay if you got your IP tied down but ... the Govt just swooping in on your business, that sux. Hard to compete with an infinite balance sheet.
So I guess they will possibly have to consider modifications to add further value for the client, over and above the state version. Convenience and flexibility components will need to be worked even harder.
A good point which shouldn't be overlooked. I would expect this was already identified as a risk and HGH has its point of differentiation sorted. Also, given the choice of working with a banker or a Government official, hard choice I know given we are scraping the bottom of the barrel, but I would rather deal with a banker.
https://www.heartlandfinance.com.au/.../interest-rate
1/ Our current Standard Reverse Mortgage interest rate is 5.60% p.a. (comparison rate 5.62 p.a.*)
2/ Our current Aged Care Option Reverse Mortgage interest rate is 5.60% p.a. (comparison rate 5.71% p.a.^)
I couldn't find the compounding period for a Heartland Reverse Mortgage. So let's say it is monthly. (Please correct me if I am wrong)
5.6% over a year is the same as 5.6%/12 = 0.4667% per month.
So over one year a 5.6% $100,000 Heartland loan will clock up an interest bill of:
$100,000 x (1.004667)^12 = $105,746 => one year interest component is $5,746
Proposed Australian Federal reverse mortgage rate is 4.5%, albeit compounding fortnightly
https://www.servicesaustralia.gov.au...ch-you-can-get
4.5% over one year is 4.5%/24 = 0.1875% per fortnight
$100,000 x (1.001875)^24 = $104,598 => one year interest component is $4,598
Maybe you would rather deal with a banker. But $1,000 per year is a pretty good cash incentive to go to that government office. And let's not forget there are a large cohort of oldies who would rather deal with an office than deal via a telephone.
SNOOPY
it will also depend on marketing ... ie, who can better inform the consumer: HGH or the welfare office. the other worry is that the welfare office might have more touchpoints and generate greater awareness of its offer (to the detriment of HGH). welfare might also be seen by elder folks as more trustworthy than a bank/finance company many won't have heard of.
here's hoping govt's admin of its scheme is as poorly advertised and managed as most other govt initiatives and it quickly falls away.
yeh I was going to say not many takers of other govt loan schemes recently.... which may not mean much of course.
Also to be frank I am not sure whether I would rather deal with a govt official or a banker... both can turn on you esp this Labour govt who increasingly aren't sticking to the rules. Who is more likely to honour a contract? Whose contract is likely to be less onerous. Hard to say really. But govt is contending and will warrant consideration to those aware of this.
I think the decision would be made - at least for me - around the peripheral benefits/costs of the arrangement.
Thanks for your calcs. It's certainly not ideal is it. I know if I was a bean counting oldie, there's no way I'd be paying ~25% more interest than I had to.
Snoopy, if you know it off the top of your head, please remind me what kind of percentage the Oz reverse mortgage market means to Heartland's bottom line?
Australian Reverse Mortgages over 2020 ended the year with $NZ958m as the receivables balance. Let's say rather than lose business, Heart;and drop their rates to match the Federal government rates. The drop in interest income for that balance would be:
(0.056 - 0.045) x $NZ958m = $10.5m reduction in interest income. At Australia's 30% tax rate that equates to a 0.7 x $10.5m = a $7.4m profit fall for Heartland.
SNOOPY
Thanks Snoopy. Potentially could make quite a dent then, especially if our government follows suit. Interestingly though, the link says "Page last updated: 28 January 2020" so I guess HGH are well aware of it and haven't had to take drastic steps to counter it thus far. I wonder if there is anything out there on the uptake of the scheme since it's inception.
I was thinking when I read the comments on here about the Aussie Government scheme "is this not old news", as I have a recollection of this being discussed on here a long time ago. As you say, it would be nice to find an update on this Government scheme but it certainly does not seem to have had any major impact on HGH huge growth in reverse mortgages in Australia so far.
You are both right. The Australian pension loan scheme has been operating for a while, and since that time Heartland has benefitted. The link below
https://www.dss.gov.au/sites/default..._2021_1000.pdf
refers to a modification of the existing scheme. Under the original scheme paramenters:
"the amount of loan you get each fortnight. This amount can be up to 1.5 times the maximum payment rate of your eligible pension each fortnight."
The amended version (from 01-07-2022) says that Australian seniors, -who do not automatically qualify for a pension because it is means tested-, can borrow against their house the same amount of money as before. But the maximum they can get paid out on any one date goes up from $952.70 x 1.5 = $1429.05 (for a single person) to
"Based on current Age Pension rates, a single person would be able to receive lump sum payments of up to around $12,385 per year, while couples combined could receive up to around $18,670. The total amount of pension plus loan available will still be capped at 150 per cent of the maximum rate of Age Pension, so any advance taken will reduce the maximum fortnightly loan amount a person can take over the rest of the year."
The total amount that can be accessed under the government system has not changed. What has changed is that the lump sum that can be with drawn at any one time goes up from $1429.05 to $12,385 (for a single person). Where as before the government REL loan was a more complementary product to the Heartland REL lump sums available, this new maximum expanded lump sum is definitely overlapping with Heartland's target market. That is the way I see it.
If you need the 'fortnightly income' and a 'lump sum', then Heartland is very much still in the REL picture.
SNOOPY
Am I the only one who finds that government plan capped at a very low amount? I thought most reverse mortgages were for much larger amounts in the 6 figure range.
Quick google discovers the average reverse mortgage size in Australia is $118,627.
nah they are limited in value because of those guarantees that are in place such as never kicking them out etc.. which means they cant lend too much in case the person lives to 108
The scheme has been boosted in their recent budget, I think the Australian Pension Loans Scheme has raised awareness for the whole sector, which is good for HGH too.
However I think it also does raise the issue of means testing pensions, with owner-occupying housing being part of the asset test and with an estate duty being brought into the mix. If some people want a boost to their pension, then the quid pro quo is that their estate is reduced.
It seems a sensible development in our current situation of having very low interest rates and very expensive real estate, which often is by far the largest asset for a retired person, whose extra income from fixed interest is now tiny.
Ironically however, I think the Australian Pension Loan Scheme in effect will not levy this quasi estate duty on the wealthiest Aussies as they will less likely need a pension boost.
There is an analysts dilemma when trying to make sense of 'average' numbers. If there is a cluster of loans at $18,000 and a cluster at $218,000, then analysing what might happen to an average loan of $118,000 is not really a useful exercise.
The most thorough assessment I have seen on Heartland's REL business in Australia is in the 19th November 2018 investor day presentation. Slide 21 tells us the 'average' REL loan for Heartland Australia is $120,000, leveraged at 25% of the house value. But the same slide tells us that -at initiation- the average LVR was 12%, let's say $60,000. Effectively what that slide is saying is that with the average REL holder, only half of the money they owe is capital borrowed. The other half is 'deferred interest'. That means the average initiated loan is only $60,000. And that may be made up of a cluster of loans at $12,000 and another cluster at $108,000.
($12,000 + $108,000) / 2 = $60,000 average
Slide 29 shows the use these loans are put to include: Renovations, travel, medical expenses , car, aged care , debt consolidation, mortgage refinance, support next generation, everyday bills......
It would be the lower 'lump sum' cluster of loans $12,000 that Heartland are at risk of losing. You could do up a kitchen, or bathroom for that. You could have a decent holiday within Australia. You could get some lesser medical procedures done: a cataract operation, a set of hearing aids. You could probably refinance an outstanding credit card debt too. You could buy a good reliable second hand car.
However, you could not do up your kitchen and your bathroom. You could not buy a new car. You could not do a 'world trip'. You could not get a hip operation. So there is still a good window of opportunity there for the likes of Heartland offering REL loans to those wanting something 'that little bit more' than the basics.
On reflection, my forecast of a $7.4m 'net effect' fall off in profit from these latest Aussie budget measures may be a little high. And that 'fall' doesn't take into account the underlying growth whereby even if no new net loans are written, the receivables balance will still grow at an underlying 5.6% per year. Yet I do take the 4.5% Australian Government loan rate as a signal that 'the market' (and Heartland) are being a little greedy with their REL loan package in the post Covid-19 low interest rate environment.
SNOOPY
I doubt whether the Sydney person who took out an REL loan of $1mil with HGH would have been approved by the Aussie Govt.
[may have been $2mil].
Mary Holme talking about reverse mortgages…RNZ
Been making some steady progress lately which is nice. $2 sometime in the next month or two ?
Has Laura the Chief Operating Officer picked the TOP
Selling at 1.93
http://nzx-prod-s7fsd7f98s.s3-websit...349/347629.pdf
No she hasn't. Someone else picked the top ages ago at $2.14 under the other ticker handle and that's when earnings were only about two thirds of what they are now. I reckon we're going over that in due course and this time based on much higher earnings, they're worth all of that.
Are the circumstances and management style currently facing HGH the same as what faced ATM?
There is only the one insider sale of HGH (so far). Looking at the details in the document, she is in joint ownership with another person (her husband?) Maybe the other owner needed funds.
The previous insider trade was for a (smaller) purchase in April.
HBL/HGH was around $2.20 at the peak before the restructure a few years ago.
1.95 @ today's close is my prediction.
SBS reverse most of their covid overlay and report huge increase in profit (to $41m)
Also say that NIM has expanded lately.
We are always in awe of Heartland’s NIM ....about 4.5% compared to most other banks (including the big four)
Question ....why doesn’t high (above average) NIM lead to high (above average) ROE
I'll block the entrance to the kennel and lay on it. Since pandas don't hibernate.
https://www.youtube.com/watch?v=dqT-UlYlg1s
So i'll just fill my time with eating bamboo rather annoyingly with no real purpose.
Probably a bit of that. A car loan runs for 3-5 years.
A home loan runs for 30 years
Credit card runs forever? :mellow:
You have to run the same car loan multiple times.
Heartland bank would have more business loans as a percentage with 'annual reviews' performed by credit. More touch points?
Only surmising
Typically what Heartland and UDC do is send them a letter just over halfway through a 60 month loan pre-approving them for the same amount of money as originally. Easy to do if they have perfect repayment history.
Then the funder will share this data with the original car dealer who will ring the customer to discuss trade in values and new car prices etc.
Cool ay
I reckon HGH share price will hit 2 bucks this week
Just about winner:t_up:
Still think we'll see the last cent tomorrow W69?
From this day last week. No she hasn't.
From this day last month...Fair value, still a little over 15% capital gain to come in the next 11 months in my opinion and then there's the very attractive fully imputed dividend yield.Quote:
Decent trading update today that was in line with my thinking. I am looking for net profit in the early $90's million range for FY22 which gives them an eps of approx 15.8 cps and am hopeful the economy will be in a strong recovery and am looking for a recovery PE of approx 14.5 times earnings (which is the average of where the peer group I follow on the ASX is currently trading).
I am hopeful of a target price one year hence of ~ $2.30. Beagle
I wouldn't rule out the possibility of it going a little over $2.50 this time next year as the market starts to think about earnings possibly topping $100 in FY23.
Still reckon 2 bucks later today
Lucky day so far -- did a few things on computershre without any issue - a miracle - but even greater miracle did something on Heartland App ant it didn't need any human intervention from Heartland people
So things going well ...and HGH at 2 bucks:t_up:
That $2 wall got smashed finally