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Pacific Equity Partners finances reverse mortgage lender

Pacific Equity Partners (PEP) will finance Household Capital, a reverse mortgage lender, to address the retirement funding and housing needs of senior Australians.

PEP is investing in a financing layer of Household Capital’s funding structure, alongside IFM Investors and senior financier Citi. The invesment equips Household Capital with over $600 million to broaden its residential mortgage offerings through 2023.

Household Capital chief executive Joshua Funder said: “PEP brings deep experience in wholesale debt, structured finance and scaling business growth.”

“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.”

PEP managing director Jake Haines expressed that Household Capital is a prime investment prospect and noted the private equity firm’s eagerness to expand into a new market segment.

“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,” Haines said.

“Household Capital has pioneered innovative, scalable debt funding to meet the retirement funding and housing needs of an ageing population.”

In a statement, Household Capital noted demographers have indicated that more than five million baby boomers face the prospect of inadequate superannuation balances due to increasing life expectancies. The median household superannuation balance at retirement is under $200,000.

Yet, Household Capital also deemed Australian retirees “the wealthiest in the world”, boasting a median home equity of over $800,000.

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

Sherry, who is a former assistant treasurer, added: “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.”

In July, Funder told Financial Standard that the family home has a critical role to play in meeting the challenge of an ageing population – funding.

“Australian retirees are now the wealthiest retirees in the world, however most of that wealth is tied up in their homes. Home equity is four times the value of superannuation for the median retired household,” he said.

“The federal Retirement Income Review led the way globally by including home equity among the three pillars of retirement funding and Australia has the world’s best regulation to help ensure responsible access to home equity retirement funding.

“We need to commit to clear principles that deliver better outcomes for our seniors: greater awareness of home equity as the third pillar of retirement funding; confidence in voluntary self-funded retirement from home equity as private property; trust in retirement entitlements and wealth protections; innovative, scalable market-based solutions; purpose-based funding to meet the challenges of retirement housing, funding and aged care.”

Published in Financial Standard, 14 August 2023

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