And they can do the sums and publish the result within a week after period end.
Most other countries take 2 to 3 months eh
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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.