The market for reverse mortgages in Australia has grown to $3.7 billion, according to a new report, with brokers writing one in three new reverse mortgages.
In its annual Reverse Mortgage Report, Deloitte found that at 31 December 2014, the reverse mortgage market in Australia consisted of 40,000 reverse mortgage facilities, with total outstanding funding of $3.7 billion – a 3% increase over the year.
Approximately 3,400 new borrowers took out a reverse mortgage in 2014, with the average size of a reverse mortgage loan at almost $92,000, up from $86,000 in 2013. Brokers and planners accounted for 31% of settlements in 2014, compared to 69% through the direct channel.
According to the report, the use of property to be considered alongside other retirement sources is an area of emerging interest across broader financial services organisations including industry funds, retail wealth managers, banks and non-bank lenders and insurance companies.
Deloitte estimates reveal that more than $500 billion of home equity is held by Australians aged over 65.
“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. 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,” James Hickey
, Deloitte Partner Financial Services and author of the Deloitte report said.
In addition to new borrowers, 4,900 borrowers voluntarily repaid their reverse mortgage loan in 2014, representing 12% of total borrowers. Hickey says this proves that many borrowers are using the product to cover short terms needs and then repay the mortgage once they are ready to finally downsize their home.