Changing views on retirement as well as capacity for those of a traditional retirement age to stop working could stand to have an impact on the future for reverse mortgage potential.
While more than 8% of people who are 62 or older have considered a reverse mortgage, just 2% actually got reverse mortgages, according to a nationwide survey conducted in December 2012 based on the RAND American Life panel of 6,000 members.
The results, presented by Dan Gorin, supervisory policy analyst for the Federal Reserve, to attendees of the National Reverse Mortgage Lenders Association annual meeting earlier this month, may shed some light on market potential for reverse mortgage loans.
In addition to specific data on reverse mortgages, the survey, which included an Internet panel and supplemental data from more than 300 surveys including the University of Michigan’s Health and Retirement Survey, found shifting behaviors around retirement and debt among American households.
“Coming out of the last recession and housing crisis, household debt is a growing problem. More people are holding mortgage debt as well as student loan debt later in life while homeownership rates are down,” the survey noted in its findings.
Further, fewer than half of people seek advice when it comes to housing and retirement finances, Gorin told conference attendees, and their ideas about retirement have changed substantially.
“The definition of retirement has changed dramatically,” Gorin said. “In the past when we asked people surveyed, those who were planning to work forever had answers that were twofold; some said ‘I like to work,’ and some said, ‘I need the money.’ More recently, more people saying they’re never going to retire because they need to work.”
Respondents in the 62-plus category indicated that largely, they had not considered a reverse mortgage. However, 8.6% in the age category had, while just 2% actually took the loan.
When asked about influences on their decisions, 60% of those without reverse mortgages who decided to get or consider one reported they had seen or heard advertising. Another 25% said they wanted to get a reverse mortgage after doing research, while 20% said a friend or family member had suggested the option. For third party influencers, 20% reported being approached by someone trying to sell a reverse mortgage and 6% said it had been suggested by a financial advisor.
Ultimately several factors may weigh in on the market, including those who have experienced financial stress or who have needed help paying bills, according to the survey findings, in addition to people planning to work longer, being comfortable making financial decisions and regaining home equity after the housing crash.
Written by Elizabeth Ecker