As reverse mortgages continue to carve out their role in the U.S. retirement planning conversation, these products are growing increasingly popular for such strategies in “the land Down Under,” a recent study suggests.
The use of home equity as a resource to be considered with other retirement sources is an emerging interest among Australian financial services organizations, including retail wealth managers, banks, non-bank lenders and insurance companies, according to the Annual Reverse Mortgage Report from Deloitte.
And this growing interest has translated into the increasing popularity of reverse mortgages in retirement.
In the yearly report, which was released Monday, Deloitte estimates more than $500 billion of home equity is held by Australians age 65 and older, with the nation’s total reverse mortgage loan book worth $3.66 billion at the end of 2014.
Although this represents a more than 3% increase to the country’s reverse loan book, the nearly $3.7 billion value still represents a small portion of the potential funds available to be accessed by Australian seniors, said Deloitte Partner Financial Services James Hickey, who authored the 2015 report.
Currently, there are nearly 40,000 reverse mortgages that have been issued in Australia with an average loan size of $92,000, up from $86,000 in 2013.
“A reverse mortgage offers the option for retirees to stay in their home and access equity in a manner which may have far less impact, if any, on their social security entitlements,” Hickey said in a written statement. “This means that a reverse mortgage can be a very useful option for retirees to consider when looking for ways to supplement their superannuation retirement income.”
The 13th annual study of the Australian reverse mortgage sector, commissioned by the Senior Australians Equity Release Association (SEQUAL), shows that as of December 31, 2014, some 3,400 new borrowers took our a reverse mortgage last year.
The top three uses for home equity via a reverse mortgage include debt consolidation, supporting an income stream and home improvements.
“Being aware of equity release options and how they work requires both support and education,” said Hickey. “We believe banks, insurers, qualified financial advisers and superannuation funds are best placed to embrace, understand and educate Australians on the options available with equity release products.”
This past year, however, Hickey noted there was a renewed interest in how using a reverse mortgage could be structured to support financing needs for Aged Care accommodation bonds.
“The changes to aged care accommodation payments that come into effect July 1, 2014 with the Living Longer, Living Better reforms, have generated additional interest in how reverse mortgages can play a far greater role in assisting senior Australians navigate one of the most stressful stages of retirement, that of financing the accommodation bond,” Hickey said.
Written by Jason OlivaPrint Article