The government appears set to lend its support to the reverse mortgage market, but the industry may not be able to meet an influx of demand.
News Ltd has claimed the Federal Government is set to urge retirees to adopt reverse mortgage products as a means of funding aged care. Should this happen, Seniors First managing director Darren Moffatt has said existing lenders would be unable to meet demand.
“It’s a positive for the industry and a positive for consumers, but it needs to be managed well. The last thing we want to see is a wholesale movement to the scheme with a lack of supply, and currently there are only two or three lenders in the market,” he said.
Moffatt predicted, however, that lenders may flood into the market if the government voices its support for the reverse mortgage sector.
“I would expect that lenders would be pretty quick to come into the breach. Credit growth is down, so an opportunity like this is very attractive to banks and lenders. If the government is serious about this, they may have already been in talks with banks and lenders about getting involved in this market,” Moffatt said.
Another potential problem facing the reverse mortgage market could be a lack of qualified brokers. Moffatt said few brokers specialised in the products, and demand could quickly overwhelm supply.
“I’d certainly be happy, because we’re one of the few specialists left in this area. The pool of brokers who are qualified – and by qualified I mean accredited by SEQUAL and who sell these products on a regular basis – is pretty small. I daresay there’s enough of a network to cover initial enquiries, but demand would scale up pretty considerably if the government got behind this product,” he said.
However, Moffatt warned against brokers jumping into the market merely to diversify their revenue. He said brokers looking to enter the reverse mortgage market would have to become specialists, and position themselves to consumers as experts in the products. This may not be worthwhile for many brokers who may be better served setting up referral relationships.
“Some brokers have to question whether or not this is for them. Just because it happens to be an opportunity in the market doesn’t mean it’s for them. The loan size is smaller, and there’s quite a lot of work involved. People who do these loans are generally quite altruistic and enjoy helping people. They’re certainly not as lucrative as normal forward mortgages,” he said.
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