The market for reverse mortgages will continue to grow, driven by demand from the baby boomer generation.
The Australian reverse mortgage market will grow to become a robust market, according to National Reverse Mortgage Lenders Association Committee vice-chairman Tom Scabareti.
"We have a whole new crew coming into this market... called baby boomers. The boomers have a different mentality than our parents and grandparents had. They do not necessarily want to downsize, they want to maintain or have a higher lifestyle as they retire."
"Unless they have done well with their investment planning or their superannuation planning, the equity in their home is their resource," Scabareti said last Friday.
Although the current economic downturn will slow the growth of the industry, Scabareti does not believe it will change the prospects of the market in the long-term.
"Once we are through this economic blip, you will see a resurgence of people looking at equity as a solution. The ageing demographic is not going to change, everyone is going to live longer than they expected and they are going to face lifestyle [issues]."
ABN Amro, which provides reverse mortgages, supports Scabareti's views.
"The demand we are getting is increasing," said ABN Amro director of reverse mortgages Martin Lynch.
Market depression has also resulted in more retirees enquiring about reverse mortgages. They have seen their superannuation investments dwindle, but are not willing to sell off their investments in the current soft market. Therefore, they are looking for alternative sources of income, he said.
At the end of 2007, the value of outstanding reverse mortgages in Australia stood at $2 billion.
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