The reverse mortgage market is positioned for growth in Australia, a recent study shows, with an industry group predicting that the percentage of retirees who take out a reverse mortgage is likely to increase from 2% to 5% or 10%.
The growth may be based on borrowers using the loan option as an income supplement, rather than “a way of paying for holidays,” a Sydney Morning Herald article reports.
In Australia, where the age floor for reverse mortgages is 60, the market saw a downward turn upon the global financial crisis. Now, the article says, that market is rebounding.
Data from Deloitte showed the value of outstanding reverse mortgage loans in the country increased from $2.7 billion at year-end 2009 to $3 billion in 2010. During the year, the total value of reverse mortgage loans made increased 7% from a year earlier, the study shows.
The average loan amount has increased continuously, the study also notes, and retirees are borrowing what they need, rather than what they can get. Uses of reverse mortgages were largely source of income (18%), home improvement (15%) and debt repayment (13%)..
Australia’s reverse mortgage industry group, Senior Australians Equity Release Association (SEQUAL), commented on the shift for the Sydney Morning Herald.
“What we are seeing is a very clear shift towards more caution and using it to supplement income,” SEQUAL chief executive Kevin Conlon told the Herald.
“Reverse mortgages, or variations of them, are going to be as common as borrowing a home loan from a non-bank lender,” he said.
View the Sydney Morning Herald article.
Written by Elizabeth Ecker