A new report from Deloitte Actuaries and Consultants found the reverse mortgage market in Australia had a total outstanding funding of $2.7 billion through more than 39,000 reverse mortgage loan as of December 31, 2009. The country saw growth of 4 percent growth in the six months between the end of December of 2008 to June 30,2009; and a 9 percent increase over the entire year.
Commissioned by the Senior Australians Equity Release Association (SEQUAL), the study found there was 2,665 new reverse mortgage borrowers during the second half of 2009 and had an average loan amount of $53,000 and variable rate loans were found to be most popular type.
Settlement figures for the second half (H2) of 2009, at $141 million, were level with the second half of 2008, even though that number dipped in the first half of 2009 to $122 million. James Hickey, Deloitte Actuaries and Consultants partner who led the study feels that “this gradual recovery in growth appears to reflect the cautious optimism of the economy in general.”
New South Wales was found to have the most outstanding loans compared to the other Australian states at 33 percent, followed by Queensland with 21 percent, and Victoria with 17 percent. And though couples remain the leading segment of borrowers but are surpassed by single women when it comes to loan size, with couples averaging $76,000 and single women averaging at $84,000. Single men were found to have the average loan size of $69,000. The study has found the age of borrowers to remain consistent since 2006, with the average age of new borrowers at 73-years old. Borrowers under 70 constituted for almost 40 percent of all new loans and 30 percent of all outstanding loans. This is the fifth time in the duration of these bi-annual surveys that Deloitte was able to compare the amount borrowed across age groups. The results conclude that older borrowers (over 75-years) used only around half what they were actually allowed to borrow, while younger borrowers (70-years old and younger) drew down the majority of their available facility.
The study found home improvement to be the primary reason for taking out a reverse mortgage in H2, moving assessing regular income to the number two spot, followed by debt repayment. Nearly one out of every nine existing borrowers drew down additional funds from their facility in the second half of 2009 with an average amount of $14,600.
Kevin Conlon, Chief Executive of SEQUAL, observed, “attitudes towards retirement funding are changing as the largest generation within the Australian population, the so-called Baby Boomers, approach the end of their working lives.” “The home is increasingly being consider at part of the planning process with equity release been seen as a means to unlock the substantial wealth stored in property in order to live well,” said Conlon, who strongly believes as the Australian population ages, the trend towards release home equity in order to fund retirement is unavoidable.
Written by Kelly Mellott