Breaking The Mold Through Mortgage Innovation

 

Andrew Mills is the Head of Strategic Development at HomeStart Finance in South Australia. His background includes time in financial markets and running his own business consultancy before joining HomeStart 15 years ago. He started there in corporate treasury, ultimately working across strategy and product before achieving his present role as Head of Strategic Development for the last 3 years. His primary responsibility involves creating and developing opportunities for people to achieve his and the organisation's very strong commitment to home ownership.


HomeStart Finance was set up in 1989 by the South Australian government as a response to the then-high interest rates and a lack of affordable home loan finance options.

Since then, HomeStart has assisted approximately 70,000 South Australian households into home ownership, lending more than $7 billion and assisting almost 1 in 5 first home buyers in the State. Whilst owned by the State government it operates as a commercial enterprise with both financial and social return objectives. The relative tension between these two goals has in part helped the organisation stay disciplined, focused and successful in nearly three decades of operation.

Homestart provides affordable housing solutions in South Australia through innovative loan products such as a Shared Equity Option and the Graduate Loan, and is one of the few institutions in the world actively innovating at the mortgage product level.

Andrew explains "product development is heavily customer-centric; we design our solutions around the three key problems faced by home buyers: borrowing power, upfront costs and, more recently, confidence" and, as to why the organisation is successful, notes that one of the main reasons is “the ability to break out of traditional mindsets and conventional wisdom within the finance industry”.

Results from the last three years speak to the success of the organisation's strategy. A declining portfolio has returned to consistent, sustainable growth, recently exceeding $2 billion for the first time. Key products have been re-designed while new marketing strategies have assisted in repositioning the brand and building awareness.

Andrew personally has grown by attaining "a greater knowledge of self, and the art of using that to help others as well as the importance of understanding and working to strengths".

A crowning achievement was that HomeStart was awarded 1st prize by the World Bank this year for its Graduate Loan product. Andrew and HomeStart's CEO, John Oliver, were invited to the World Bank's 8th Global Housing Finance conference in Washington DC in May / June of this year of 2018. There were approximately 300 attendees from over 50 countries around the world. The conference was titled 'Breaking the Mold... New Ideas for Financing Affordable Housing', and explored innovative ideas around the role housing finance can play in ensuring access for all to adequate, safe and affordable housing.

The aim of the conference was to "not only create awareness of the major challenges in developing or strengthening housing finance markets but… also focus squarely on solutions and resolution of these challenges by highlighting innovations, new ideas and global experiences in the sector”. Andrew and John were ones who addressed the topic of mortgage product innovation. Andrew was invited to speak specifically on HomeStart's Graduate Loan product.

“It was a privilege to be able to share our work with a global audience, and it reflects well on the work and commitment of the entire HomeStart team". Indicating where future developments might come from, Andrew observes that “there are some exciting innovations combining finance, data, credit and technology coming out of developing countries, and that’s an area we will watch closely”.

“Homestart's Graduate Loan has performed completely contrary to conventional mortgage market wisdom”.

Even though the Graduate Loan has a higher LVR, it has not proven to be higher risk which is thought to stem from the educational criteria attached to normal credit rules: customers must have at least a Certificate III qualification. The Graduate Loan recently (in January of this year) topped $1bn of lending since it was first launched 15 years ago, but over half of that result has been achieved in the 3 years since it was expanded in 2015 and Andrew say it now represents well over a third of new lending. An eligible graduate can get started with as little as a 3% deposit to buy an already established home, or a 6% deposit to build a new home. The basic premise of the Graduate Loan product is that educational qualifications can and should be used as a predictor of home loan success... that education can be used as part of the credit decision and can be an effective alternative means of assisting a potential borrower to obtain finance. It works on an assumption that a graduate’s level of education may allow the graduate to earn more in the future and be less likely to lose work... attaining a qualification shows a determination and also perhaps a propensity to become employed and stay employed and earn more over time relative to people who do not have qualifications. “The evidence shows us that once a person attains at least a Certificate III, their income starts to grow, and they are just as employable as higher degree holders”.

Andrew has been a member of The CEO Institute for approximately 3 years, having been encouraged to join by his CEO, John Oliver, who was previously a loyal longstanding member. Andrew regards The CEO Institute as:


“an effective and professional sounding board and network; an important constructive learning environment; a wonderful reality check; and a great way of holding oneself accountable”.
 


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