With Citi and IFM Investors jointly providing the capital, the reverse mortgage provider believes it can better meet growing demand.
Household Capital has confirmed it has entered into a securitization facility with Citigroup Inc (Citi) and IFM Investors, the global bank and global fund manager collectively providing the reverse mortgage provider with $300 million.
According to Household Capital, this injection of funds will help meet “the growing demand from Australian retired homeowners who are looking for responsible, long-term funding for their retirement needs.”
Household Capital Managing Director Dr Joshua Funder said that by partnering with Citi and IFM Investors, the reverse mortgage provider is “making access to home equity more efficient, more available and more reliable for retirees”.
“This funding facility provides Australian retirees with low interest rates, which means greater access to funding their retirement from their home equity,” he said.
Dr. Funder later added that Household Capital is focused on responding to recent reports from the federal government regarding retirement income, saying this funding program is an “endorsement of our approach” and will continue to help retired Australians to live well at home”.
Released in July 2020, the Treasury Retirement Income Review noted that “relatively small portions of home equity through the pension loan scheme” could be a method of increasing retirement income, and that the existence of asset-rich and income-poor retirees with an old-age pension suggests that “the release of home equity has significant potential to help support retirement incomes”.
Co-author of Retirement Income Review and Chair of the Household Capital Advisory Board, Professor Deborah Ralston, said that for most people retiring today who have not had “all the benefits retirement pension during their working life”, their house represents a “considerable part of their net worth”.
“Boomers approaching retirement want to know they can have a good quality retirement and feel confident and happy that they can put their resources to good use, including their home equity,” Prof Ralston added. .
Representatives from Citi and IFM Investors both expressed positive affirmations of the deal, noting that the investment will help the reverse mortgage provider as well as retired Australians.
Citi Managing Director, Head of Finance and Securitization Australia and New Zealand, Will Mortimer, said: “We were delighted to work with Household Capital and IFM to develop an innovative securitization structure that balanced the needs of Household Capital, Citi and MFI investment requirements.
“The facility will refinance Household Capital’s legacy financing arrangements and ultimately provide a more cost-effective, long-term and scalable financing solution for Household Capital to help grow its business.”
Hiran Wanigasekera, IFM Investors Executive Director, Debt Investments, added: “We believe our investment will help generate risk-adjusted returns for our investors, while delivering a social dividend to Australian retirees.
“By working with Household Capital, we are able to directly support the quality and availability of retirement housing and financing. »
[Related: Super for housing would escalate property prices: Report]
Sam Nichols is a journalist at The Adviser and Mortgage Business. His reporting has appeared in a range of outlets including ABC News, SBS’ The Feed and VICE.