Locked out borrowers getting 'really angry'
By
Ben Abbott
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31/08/2011 7:00:00 AM
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4
comments
Vast changes to the reverse mortgage market in tandem with the recent NCCP introduction is leaving a large pool of older borrowers without acces to funds.
Seniors First managing director Darren Moffatt said that since the global financial crisis, reverse mortgage lender numbers have contracted drastically, down from 21 prior to the crisis, to four major lenders at present, including St. George, CBA and Bankwest.
Moffatt said while the previous minimum age for equity release was 55, it has now also increased to 63, but mostly 65.
“The sector has really felt the brunt of the GFC; equity release requires capital to be tied up for a long time, so when capital became scarce, the sector was the first to feel the result of that," Moffatt said.
The result is that the expectations of many older borrowers for access to equity in their properties is often not being met, Moffatt said.
“I have literally had quite a few potential borrowers on the phone, and when they have found out they can’t get money like they used to be able to – they can’t release equity – they are really angry,” he said.
The NCCP is only compounding the problem for 55-65-year-old borrowers.
"The NCCP is definitely causing lenders to be very, very careful or reluctant to lend to people in their late 50s to early 60s with forward mortgages; if they don’t have an exit strategy – for example a large super fund, or a second property – it can be difficult for these borrowers to get funds," Moffatt said.
“The point is, this very significant change across the industry has happened, and is affecting a huge amount of people that have no idea that the change has occurred,” he said.
Moffatt argues the result is a “massive market opportunity” for banks and other lenders in the pre-retiree space, due to huge demand for access to existing equity as the community ages.
Related stories:
Government may support reverse mortgage market
ASIC to focus on advice to the aged
Latest Comments
Total:
4
comment(s)
Rod Palmer on
31 Aug 2011 11:56 AM
Even in Russia you don't have government controlling your investment and lifestyle decisions. It has nothing to do with the Government how people to invest or live their life.
Ozboy on
31 Aug 2011 12:39 PM
True Rob until it all goes bad then nobody wants to take ownership of the situation. Look at Storm Financial, all good while the money rolled in for years and years but when it turned bad all of sudden no one stood up. This is what you get when people don't take accountability. That's Life!
gmashe on
31 Aug 2011 12:46 PM
This is about something much more powerful than mere Government - it's the lenders that have done this. It's a typically conservative overreaction to the legislation.
countrybroker on
01 Sep 2011 08:28 AM
The points put across in this article are factual. The market is very hard for retirees and people over 55 BUT not impossible , reverse mortgages are still being written ( I have just serttled one)BUT it is a market that has constraints and rightly so, why, when you are dealing with older clients they can be vunerable nad need to be treated with a great deal of of caution and respect. In regards to the working over 55 years clents it is a matter of putting a "clear case" to the lender, they are looking for brokers to do their job and "know their clients", that is what this is all about, don't complain, comply, and do the work that should have always been done.Dewals can be written that deserve to be written, yes some lenders are being cautious, avoid them and deal with the common send approach lenders.