Joshua Funder

Household Capital, a leading Australian provider of home equity retirement funding, today announced the completion of HHC 2025-1 RMBS Trust, a $270m mortgage securitisation dual-rated by Moody’s and S&P. Citigroup Global Markets Australia (“Citi”) acted as Arranger and Citi and Macquarie Debt Markets team (“Macquarie”) were Joint Lead Managers on the transaction.

The innovative mortgage securitisation allows Household Capital to continue to meet the increasing demand from retired Australian homeowners seeking responsible, long-term funding for their retirement needs – a sector based on more than $1.3 trillion in retiree home equity available today.

The Household Capital portfolio attracted investment from global insurance, superannuation, banking and institutional credit fund investors from Australia, US, UK, EU and Hong Kong. The final transaction had strong investor demand and was more than 4x covered.  The senior A Note was rated AAA by S&P and Aa2 by Moody’s with an average weighted life of 3.4years based on an underlying portfolio loan-to-value ratio of less than 25%. An innovative subordinate X Note with an average weighted life of 1.8years was introduced in the securitisation to provide sustainable originator funding of mortgages with lower cashflows.

The HHC 2025-1 transaction builds on the successful inaugural 2024-1 transaction to efficiently allow the trust to fund ongoing customer drawdowns on their home equity under their existing approved amounts as well as through potential future increases to their credit contracts – an important structural feature to ensure home equity is made available by the trust to fund the current and future needs of retirees.

The Household Capital mortgage securities were attractive to global investors based on meeting international risk retention standards.  Household Capital intends to list the notes on the ASX subsequent to the transaction.

Household Capital is a specialist 60+ lender, originating mortgages that don’t require the borrower to have an income or make regular repayments and provides a range of home wealth access options distributed direct to customers as well as via partners, advisers and brokers. The company began mortgage origination in 2019 and has built a contracted mortgage portfolio of over AUD$730m.

Household Capital CEO, Joshua Funder, said “Our latest innovative mortgage portfolio securitisation is a great outcome for Australian retirees and a big step forward in the evolution of the sector. We are delighted to work with Citi and Macquarie to deliver the high quality of our customers and the low-risk nature of our mortgages to local and global investors.   Our scalable securitisation program is essential to sustainably scale retirement housing and funding and help Australians meet the challenge of an aging population”.

“We were delighted to attract strong, global, diverse investor demand for our securitisation.  The way Australian retirees access the wealth in their homes using a Household Loan is different from similar approaches here and elsewhere. The rating on our portfolio reflects a series of key differentiators of Household Capital equity release mortgages: higher voluntary discharge, shorter duration, lower negative equity risk and higher cashflows. We have achieved a very strong dual rating and continued to innovate so these securities deliver for our customers, our investors and Household Capital” Funder said.

Nick Sherry, Household Capital Chair, said “Household Capital continues to lead the way in providing access to home wealth for older Australians. The securitisation of our mortgage portfolio is a major milestone in providing billions of dollars each year in additional funding for an ageing population.”

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Joshua Funder

Key points:

•  It is critical to change the narrative on the role of the home in retirement.
• The Actuaries Institute believes unlocking 20 percent of the $1.3 trillion in
  housing wealth would deliver retirees an extra $260 billion to help fund another
  25 or 30 retirement years. The means to unlock this wealth is now available,
  comes with strong, well-validated consumer protections and can help Australia’s
  retirees live well at home.
• Household Capital urgently calls for improved national awareness of responsible
  long term access to home equity wealth for all homeowners 60+ years old.

Household Capital, a leading Australian provider of home equity retirement funding, has
welcomed the Actuaries Institute report More than Just a Roof: Changing the Narrative on
the Role of the Home.

Dr Josh Funder said, the home provides housing and age-appropriate accommodation,
retirement funding and access to wealth as well as community and connectedness. Further,
it’s the preferred place for ageing in place and in-home care.

“It provides housing and age-appropriate accommodation, retirement funding and access to
wealth as well as community and connectedness. Further, it’s the preferred place for ageing
in place and in-home care.”

Australia has established world leading national infrastructure relating to home equity
access.

• The federal government’s Retirement Income Review (2020) includes home ownership
  with private savings as the third pillar of retirement funding.
• Australia has world leading consumer regulation and protections for reverse mortgages
  enshrined by the National Consumer Credit Protection Act 2012 and validated by the
  2018 ASIC Review of reverse mortgages.
• The federal government’s Home Equity Access Scheme provides limited access to
  home equity for long term retirement funding.

Household Capital urgently calls for improved national awareness of responsible long term
access to home equity wealth for all homeowners 60+ years old.
“Home equity needs to be positioned alongside the government pension and entitlements,
as well as superannuation, to deliver genuine access to wealth and confidence in
retirement”, said Funder.

Firstly, most customers access their home equity to remain in their home an average of eight
years. Discharge is overwhelmingly voluntary, there are no break fees. Secondly, downsizing
is the principal cause of reverse mortgage discharge. In other words, there is no false trade
off between accessing home equity and downsizing. Finally, customers use home equity to
be the bank of mum and dad when it’s most needed; this is available in addition to preserving
a significant bequest in home equity.

“We need broad awareness and market neutrality to scale the $300 billion national
opportunity identified in the Actuaries Institute report,” said Funder.

Household Capital believes there are several key difficulties to be overcome so as to change
the national approach to retirement savings. These are:

• Awareness, not delivery, of home equity products as part of the retirement income
  covenant, financial advice strategies, mortgage broker product options and direct to
  consumer communications.
• All home equity access products to be equally well regulated, to provide transparency
  and consumer protections. This includes the Home Equity Access Scheme to be
  regulated as a credit product and reversion contracts to be separately regulated by
  ASIC.
• The Home Equity Access Scheme to be structured and priced to scale sustainably,
  indexed along the same lines as the HECS-HELP student loans.

The Actuaries Institute believes unlocking 20 percent of the $1.3 trillion in housing wealth
would deliver retirees an extra $260 billion to help fund another 25 or 30 retirement years.
The means to unlock this wealth is now available, comes with strong, well-validated
consumer protections and can help Australia’s retirees live well at home.

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Joshua Funder

Household Capital, a leading Australian provider of home equity retirement funding, today announced the completion of HHC 2024-1 RMBS Trust, a $263m mortgage securitisation rated by Moody’s. The Arranger and Sole Lead Manager on the transaction was Citigroup Global Markets Australia.

The innovative mortgage securitisation will allow Household Capital to continue to meet the increasing demand from retired Australian homeowners who are seeking responsible, long-term funding for their retirement needs – a segment of the market which has more than $1trillion in home equity available today.

Household Capital is a specialist 60+ lender, originating mortgages which don’t require the borrower to have an income or make regular repayments and provides a range of home wealth access options distributed direct to customer as well as via partners, advisers and brokers. The company began mortgage origination in 2019 and has built a mortgage portfolio of over $420m.
The Household Capital portfolio attracted widespread interest from insurance, superannuation, banking and institutional credit fund investors. The final transaction was 1.6 x covered and upsized.

Household Capital CEO, Joshua Funder, said “Our inaugural mortgage portfolio securitisation is a great outcome for Australian retirees and a big step forward in the evolution of Household Capital. The quality of our customers and the low risk nature of the mortgages we originate were critical in attracting local and global investors to sustainably scale retirement housing and funding and help Australians meet the challenge of an ageing population”.

The facility will refinance part of Household Capital’s existing mortgage portfolio and is based on a mortgage portfolio with an average loan-to-value ratio of less than 25%. “The way Australian retirees access the wealth in their homes using a Household Loan is different from similar approaches elsewhere.  The rating on our portfolio reflects a series of key differentiators of Australian equity release mortgages: higher voluntary discharge, shorter duration, lower negative equity risk and higher cashflows. We have achieved a strong Moody’s rating and innovated significantly to obtain a premium to par for the rated notes” Funder said.

Another innovative feature of the HHC 2024-1 RMBS Trust is that it will allow Household Capital customers to continue to draw on their home equity under their existing approved amounts as well as through potential future increases to their credit contracts.

Nick Sherry, Household Capital Chair, said “Household Capital has pioneered the delivery of home wealth to Australians. The securitisation of our mortgage portfolio is a milestone in the growth of our business.”

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Joshua Funder

Household Capital, a leading independent Australian retirement funding provider, is pleased to announce PEP will participate in a financing package to provide retirement funding and housing to Australian seniors.

PEP will invest in the mezzanine debt portion of the wholesale funding facility, joining existing mezzanine debt provider IFM Investors, the industry super-owned global fund manager, as well as senior financier Citi, one of the world’s biggest banks.

The funding provides Household Capital with access to over $600 million of wholesale funding to expand residential mortgage origination through 2023.

“Many Australians are being challenged by cost of living pressures and higher interest payments,” said Dr Joshua Funder, CEO of Household Capital.

“This funding will allow Household Capital to meet increasing demand from Australian homeowners to access the wealth in their homes and support adequate retirement funding, housing and care.”

Household Capital already counts UK-based Legal & General and Sydney-based Helia Group Ltd as strategic corporate equity investors and partners. “PEP brings deep experience in wholesale debt, structured finance and scaling business growth,” said Funder.

“We are delighted to secure PEP as a strategic partner and investor to help grow our business.”

Jake Haines, PEP Managing Director, said: “Household Capital has pioneered innovative, scalable debt funding to meet the retirement funding and housing needs of an ageing population.

“PEP identified Household Capital as a high-quality opportunity and is delighted to partner with a great company and to expand an important new category.”

Demographers indicate that more than five million Australian baby boomers face the prospect of inadequate superannuation balances thanks to increasing life expectancy.

The median household superannuation balance at retirement is under $200,000 because a low 3% compulsory contribution began halfway through the working lives of baby boomers.  At the same time, Australian retirees are the wealthiest in the world, with median home equity for retired homeowners over $800,000.

Nick Sherry, Household Capital Chairman and former Federal Minister for Superannuation and Assistant Treasurer, said the funding arrangement would allow Household Capital to deliver back to Australians their own wealth, stored in the value of their homes.

“The wealth of baby boomers is mostly tied up in their home, and our mission is to help Australians Live Well at Home,” said Sherry.

“Working together, we can help deliver widespread access to some of the $1 trillion in home equity wealth already saved by Australian retirees, providing certain, lifelong retirement funding at home. The family home has always been a missing link in the nation’s retirement funding system.”

Dr Funder said that Household Capital remained focused on responding to the Australian Government’s Retirement Income Review and Retirement Income Covenant, both of which highlighted the important role home equity can play in meeting people’s financial needs in retirement.

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Paul Stratton

Household Capital, a leading Australian provider of home equity retirement funding, is experiencing a surge in demand from older Australians struggling to meet mortgage repayments given the increases in both rates and the cost of living. Approximately 30 percent of Australians retire with a mortgage, a figure that’s expected to grow over the coming years.

A large number of mortgage brokers are referring older clients, many of whom are servicing an increasing debt from a fixed retirement income. This is especially challenging when you factor in the spiralling cost of food, energy, medical expenses and a myriad of other necessities.

Data drawn from Household Capital’s customer base indicates the average borrowing to refinance a mortgage is $250,000. Some retired bank customers are paying 5% interest on their mortgage, which equates to $12,500 per annum or $240 a week the retiree has to find. Many other retired bank customers are on back book pricing of 8%, which comes in around $20,000 per annum or over $375 per week.

For brokers with clients aged 60 plus struggling to pay a mortgage (or other debt), using their home equity to discharge their debt has a number of benefits:

• regular repayments aren’t required, which frees up the client’s income – particularly important for retirees on a fixed income
• guaranteed occupancy – there’s no default risk as long as contractual obligations (such as paying rates and insurance) are met
• client retains 100% ownership, so benefits from future capital growth in the home’s value
• home equity can also be used to refinance other debts, or modify or renovate their home to remain safely and comfortably in their family home as long as they wish to
• household Capital’s Household Loan can be repaid anytime, in part or full, without penalty.

Paul Stratton, Chief Distribution Officer at Household Capital commented, “Around 40 percent of our customers use a Household Loan to refinance their home loan and meet other major needs with the wealth in their home.”

“Growing demand has resulted in annual growth of 114 percent in the volume of loans to refinance mortgages at the end of February 2023, largely as a result of broker referrals.”

The pain of the ‘fixed rate mortgage cliff’ is expected to be felt most acutely from April 20231. As such, Household Capital expects the demand for refinancing mortgages to continue to grow throughout 2023 and beyond.

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Parkes replaces Paul Murray who had been with HHC for almost five years since the Series A financing. Parkes brings more than 25 years of financial leadership experience to Household Capital, including mortgage distribution and origination, accounting, audit, risk, compliance and securitisation.

Prior to joining Household Capital, Parkes held a number of senior finance roles covering mortgage distribution and non-bank lending, including CFO at Mortgage Choice Limited, CFO at Resimac Limited and CFO at Homeloans Limited.

He also brings extensive experience in Australian banking, credit and wealth from both Westpac and St George. He holds a Bachelor of Economics (U. Syd), MBA (Charles Sturt) and is a member of the Institute of Chartered Accountants of Australia and New Zealand.

“We are delighted to welcome Ian to the Household Capital team,” said Joshua Funder, founder and CEO of Household Capital.

“Ian brings extensive end-to-end mortgage and finance experience. His leadership will enable Household Capital to continue to lead the delivery of innovative offerings to help more senior Australians achieve a secure and comfortable retirement and have confidence in their future.”

“Household Capital is an exciting, values-based growth opportunity for me,” said Parkes.

“I’m looking forward to working with the team to further build Household Capital and further develop this significant new category to meet the financial needs of an ageing population.”

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Joshua Funder

Household Capital, a leading Australian provider of home equity retirement funding, has been announced as a state finalist in the Telstra Best of Business Awards 2023. The awards recognise outstanding businesses across various industries and regions throughout Australia.

Being named a state finalist is a significant achievement for Household Capital, which has been providing innovative retirement funding solutions for older Australian since its launch in 2019.

The Telstra Best of Business Awards are widely regarded as one of the most prestigious awards in the Australian business community. They recognise exceptional business practices, innovation, and community engagement across a broad range of industries. The awards are judged by a panel of experts from different industries who evaluate the nominees based on their business model, financial performance, customer service, and community impact.

Household Capital has been recognised for its innovative approach to retirement funding. Commenting on the award, CEO Dr Josh Funder said, “Home equity retirement funding plays a critical role in meeting the needs of an ageing population.”

“We were delighted that our innovations have once again been recognised by the Telstra Best of Business Awards.”

Drawing on home equity provides older Australians with flexibility and choice. It provides them the opportunity to get themselves ‘retirement ready’: financially, by refinancing an existing mortgage or other debt, or renovating their home to live comfortably and safely at home. Importantly, during times of market volatility, retirees can draw on home equity rather than income producing assets, preserving the longevity of those assets.

“Home equity can provide funding, wellbeing and housing in retirement,” said Dr Funder.

“It is increasingly becoming an important component of total retirement savings, alongside superannuation and the Age Pension.”

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Paul Stratton

While many retirees have substantial investments, drawing down on them in volatile markets isn’t optimal. Home equity is a viable alternative to drawing further on super or other savings, or meeting retirement needs when savings are exhausted.

For homeowners, home equity can be used to provide funding for:

• refinancing an existing mortgage or other debts in retirement
• increased retirement income to deal with cost of living pressures
• aassisting children to access the property market or to pay the grandchildren’s school fees
• home renovations or modifications so they can safely and comfortably remain in their family home
• a new car
• in-home care or the transition to residential aged care.

The Pension Boost acquisition

Late last year, Household Capital announced the acquisition of Pension Boost, an innovative home equity business that helps its customers access HEAS. This acquisition enables Household Capital to distribute both its Household Loan and the government’s HEAS, selecting the product most appropriate for financial advisers’ clients to draw on their home equity to improve their retirement funding.

For those clients with modest needs, such a small amount of extra income or a lump sum payment to cover minor expenses, the government’s HEAS is a great, lower cost option that’s available to both pensioners and self-funded retirees.

For those clients who require a higher level of income or capital for more substantial projects or expenses, a Household Loan offers the flexibility to borrow more. The maximum loan amount was recently expanded to $2 million.

“The acquisition of Pension Boost means we can offer advisers’ clients even more flexibility and choice,” said Paul Stratton, Household Capital’s Chief Distribution Officer.

“Home equity, together with superannuation and the Age Pension, provides the full package for retirees and helps mitigate longevity risk; the fear of running out of money in retirement is very real for many retirees.”

Credit team appointments

Household Capital has also bolstered its Credit team with two senior appointments late last year.

The first appointment was Anthony Nolan as Head of Credit. Anthony is a very experienced and commercial credit manager from NAB, where he held a number of senior credit roles over a 27-year period. We also welcomed John Ardiles, a senior credit specialist with more than 18 years credit and sales experience.

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Joshua Funder

Household Capital has announced its acquisition of an innovative home equity access start-up, Pension Boost.

Pension Boost takes the hassle out of the process of accessing the HEAS with Centrelink for its retiree customers. It has created a straight-forward proposition – it educates consumers on the HEAS, simplifies the application process, and undertakes all follow-up with the relevant government agencies. Since launch in 2019, Pension Boost has originated around 30 percent of HEAS applicants.

Household Capital CEO, Dr Joshua Funder, says the acquisition will enable Household Capital to provide a trusted ‘one-stop-shop’ service for Australian retirees to access their home equity to meet their retirement funding needs.

“The acquisition expands Household Capital’s proposition, widens its market reach and is consistent with our strategy to be the most trusted provider in the Australian home equity release market,” said Dr Funder.

“The combined business will position us to be the leading provider of home equity retirement funding.  Together we play a critical role in meeting the needs of an ageing population, particularly as many Australian retirees have inadequate super saved to meet their needs.”

The government’s Home Equity Access Scheme is exhibiting similar growth rates to Australia’s home equity access market, currently circa 40 percent per annum, and is expected to become a more material component of the home equity market over time.

“2023 will be the biggest ever year in Australian home equity retirement funding, forecast at over $750 million – this is an inflection point in home equity as the third pillar of retirement housing and funding,” said Dr Funder.

Pension Boost was started by Paul Rogan, a renowned innovator having co-founded Retirement Essentials after a long career at Challenger. Paul will join Household Capital’s Advisory Board, to share his expertise and experience with Household Capital’s team.

Commenting on the transaction, Paul Rogan said, “It’s clear we both share the same ambition to cement home equity access as the third pillar of retirement funding.”

“Bringing the two businesses together establishes the leading platform for retirees looking to improve their retirement funding.”

“The combined platform also enables superfunds and financial advisers to support their retiree members or clients”.

Nick Sherry, Chair of Household Capital said, “The Pension Boost platform, Paul, and the team, extends our capability and will complement our mission to deliver scaled access to home equity.”

“We believe our proposition, together with superannuation and the Age Pension, provides the full package for retirees.”

Accessing home equity provides older Australians with flexibility and choice. It provides them the opportunity to get themselves ‘retirement ready’ by refinancing an existing mortgage or other debt or renovating their home to live comfortably and safely throughout retirement. Importantly, during times of market volatility, retirees can draw on home equity rather than income producing assets, preserving the longevity of those assets.

The acquisition of Pension Boost will enable Household Capital to help retirees, as well as retirement providers such as super funds, choose the best solution for them now and in the future as their needs change.

Household Capital Advisory Board Chair, Deborah Ralston, said “Home equity is a large part of a retiree’s overall savings; the integrated platform that Josh, Paul and the team have created is an innovative way to access the third pillar of retirement funding.”

The acquisition will position Household Capital as the leading provider of home equity access in 2023.

“We are excited to bring the two businesses together to explore ways to help Australia’s retirees improve their retirement funding options with the best mix of products, interest rates and service,” said Dr Funder.

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Joshua Funder

Household Capital is delighted to have ranked #2 in the AFR BOSS Most Innovative Companies awards, in the Banking, Superannuation & Financial Services Industry. The specialist retirement funding provider came second to global finance giant, Visa.

The entry from Household Capital focused on its CX2.0, a redesigned customer experience software designed to deliver older Australians awareness and understanding of their home equity and how it can be used – alongside any superannuation and pension entitlements – to enhance their retirement lifestyle.

“A house is not just housing, it can also provide ‘funding for life’. That’s the central tenet of Household Capital’s Customer Experience 2.0 technology. It allows customers to access scenarios showing how much they can get from their home equity, how much they can access now and how much they could access in the future. That’s coupled with purpose-based lending, for things like renovating a home or funding aged care. “[Customer Experience 2.0] delivers awareness, understanding, access and trust.”
Dr Josh Funder, CEO, Household Capital

One of the questions we were asked as part of the award submission was “To what extent do you think the innovation changed people’s lives?”

Our response was to describe cases where our innovation actually transformed individual customer outcomes – we believe this truly demonstrates our impact. The examples we provided include:

• adding $1,000 per month of reliable, long term income to take a retirement from basic to comfortable
• providing access to capital to cover unexpected expenses
• paying out a mortgage for a 64 year old who lost his job due to COVID
• renovating a home to make it age appropriate for single women who don’t have access to capital or credit
• replacing ageing vehicles, to ensure mobility and access to services
• funding a range of medical needs, in-home care and meeting the high costs of residential aged care.

We’ve been working with an increasing number of financial advisers whose clients need access to capital or an increased retirement income stream. Home equity can be of particular benefit during periods of volatility in financial markets, so investors can minimise their drawdowns on income producing assets impacted by these dislocations.

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