HGH - Heartland Group Holdings

[Ferg]

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.

[percy]

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.

Agree.
With the Australian Govt endorsing the Reverse Equity Loan principals I would think it will only grow acceptance for them,in which case HGH REL's growth trajectory will continue skyward.

[Snoopy]

A good point which shouldn't be overlooked. I would expect thhttps://www.servicesaustralia.gov.au/individuals/services/centrelink/pension-loans-scheme/how-much-you-can-getis 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

[jg8512]

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.

[Scrunch]

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.

It may also grow the pie size as reverse mortgages gain more acceptability with the wider public.

[peat]

yeh I was going to say not many takers of other govt loan schemes recently.... which may not mean much of course.

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.

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.

[Cyclical]

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

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?

[Snoopy]

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

[Cyclical]

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.

[iceman]

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.