According to recent industry data, Australian banks and lenders can expect a surge in demand for Reverse Mortgage products in the years to come. As Australia’s ageing population comes into full bloom, it is predicted asset rich but cash poor ‘baby boomers’ will increasingly turn to home equity release mortgage products to fund a comfortable retirement.
Indeed, the Mortgage and Finance Association of Australia (MFAA) is already asking brokers to get prepared for the next decade. In 2014 alone, there were about 40,000 reverse mortgages worth $3.6 billion according to the Deloitte’s Reverse Mortgage Survey. This was a significant increase from approximately 16,000 reverse mortgages worth $750 million in 2005.
Over the past ten years the Deloitte’s survey results have shown a mostly steady upward trend in the number of Reverse Mortgage on issue in Australia. According to MFAA, we can expect a more dramatic surge in Reverse Mortgages over the coming decade as the volume of application and settlements speeds up to meet growing demand.
Aside from the demographic ‘push factors’ of a large cohort of ageing baby boomers facing a retirement savings shortfall, other ‘pull factors’ will also play a role in further driving the trend upwards. These include falling interest rates, the rising cost of living, and the likelihood of future cuts by government to the real level of aged pension income.
The perception of reverse mortgages by consumers has improved in recent years due to government regulation under the National Consumer Credit Protection Code (NCCP) making Reverse Mortgages the most regulated mortgage in Australia. Indeed regulation and industry bodies such as MFAA and FBAA (Finance Brokers Association of Australia) may have a more dynamic role to play in future; as more sophisticated equity release products are developed further efforts in market education and industry accreditation will likely be required.
Looking at the big picture for the moment, it’s not hard to see why Reverse Mortgages are now becoming more popular with Australian retirees:
- it can improve cash flow in retirement (no regular repayment is required)
- seniors can get quick access to cash for medical expenses or aged care
- no need for minimum income to qualify
- the borrower remains the registered home owner
- able to pay bills without stress
- peace of mind in retirement
If you would like to discuss how a reverse mortgage can help you, please give Reverse Mortgage Finance Solutions a call.