Like the US, the demand for reverse mortgages in Australia is as strong as ever. However, it hasn’t stopped lenders from leaving the market. Australian financial firm Canstar Cannex announced yesterday it would no longer rate reverse mortgage products, citing that eight lenders had left the market or stopped promoting new loans in the past six months.
"Unfortunately, we are seeing reverse mortgages fall victim to the funding shortfalls financial institutions are currently experiencing," said Canstar senior financial analyst Harry Senlitonga.
Senior Australians Equity Release Association of Lenders chief executive Kevin Conlon played down the impact, saying many of the lenders were not major players and the sector was healthy. Conlon recently called on the Australian Government to shore up competition in the sector by extending to reverse mortgage providers the help it offered to other lenders last year.
In September, the Rudd Government unveiled an $8 billion package to inject liquidity into the mortgage market. But the money was not made available to equity release lenders.
Conlon said the products played an important role for seniors who needed to access credit to fund expenses such as medical bills or a new car, without needing to sell their house. "I’d like to think this government support could be extended to include an important market like the reverse mortgage market."
Sounds a lot like what’s going on in the US…