Deloitte Finds $500 Billion Missed Opportunity in Australia Reverse Mortgages

An untapped market worth more than $500 billion in home equity of those 65 and older is in Australia, Deloitte finds in its annual Reverse Mortgage Report.

“Equity release offerings, such as reverse mortgages are a missed opportunity for both retirees and financial services providers as Australians need all the help they can get to fund a sustainable retirement,” Deloitte says in a news release about the study.

An Australian’s average super account balance was at best a third of what will be required to deliver even a modest income in retirement – at around $450 a week, according to a June 2014 point of view from Deloitte, Adequacy in Superannuation. 

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The findings support industry leaders’ claims that banks, insurers and superannuation funds need to embrace and educate Australians about the reverse mortgage product, with many saying more education about these types of mortgages should be provided to the public.

“Given that for many retirees the equity in their home continues to represent two thirds or more of their entire wealth, well in excess of their superannuation balance, a reverse mortgage is a very useful consideration for cash-poor asset-rich retirees who want either extra cash flow or to fund an aged care accommodation bond,” says James Hickey, Deloitte Partner Financial Services and author of this year’s Deloitte report.

Yet, the reverse mortgage market in Australia, by numbers outstanding, remained flat in the 12 months to December of last year. As of Dec. 31 2013, the market consisted of more than 41,000 reverse mortgage facilities, with total outstanding funding of $3.56 billion, the 12th comprehensive annual study of the Australian reverse mortgage sector, commissioned by the Senior Australians Equity Release Association (SEQUAL), shows.

“Despite the very healthy dynamics, such as controlled loan to value ratio lending and the fact that more than 12% of borrowers voluntarily repay their mortgage each year, market growth was flat last year,” Hickey says. “The 4,300 new borrowers in 2013 offset the existing borrowers who repaid their facility, and the average loan size advanced remained around $85,000.”

In Australia, equity releases are national products offered in every state and are supported by two major banks and a mix of regional and niche lenders, says John Thomas, Chairman of SEQUAL, the peak industry body that governs equity release providers and determines consumer safeguards.

For a complete summary of the findings, click here.  

Written by Cassandra Dowell

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  • I wonder if Australia’s “equity release” industry suffers from the same negative misinformation and constant reputation assassination as we do here in the magic kingdom?

    • hecmvet,

      The ratio of new Australian reverse mortgages generated in 2013 to the total 2013 Australian population is about the same as the ratio of the number of HECMs endorsed during fiscal 2013 to the total 3013 US population.

      The similar ratios suggest that many of the issues we face in the US market may be similar in the Australian market. There is one person in NRMLA with Australian connections who might be able to address your concerns, Mr. Peter Bell.

      (The opinions expressed in this comment are not necessarily those of RMS or its affiliates.)

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