Australia’s reverse mortgage industry has swelled by 80 per cent in a year to $1.5 billion – and is expected to double in 12 months.
More than 27,500 senior Australians have taken out reverse mortgages, research by Trowbridge Deloitte for the Senior Australia Equity Release Association of Lenders (SEQUAL) has found.
“I would expect that given that we’ve seen many financial planning groups just starting to get their heads around it, that we should see more growth from that sector. You would expect it to go towards doubling in the next 12 months,” SEQUAL executive director Kieren Dell said.
Mortgage brokers and financial planners have increased their share of the reverse mortgage market from 17 per cent of all loans in 2004 to 47 per cent share of the market to December 31, 2006.
The average age of borrowers is 72, with an average loan size of $54,200. Borrowers aged 60 to 70 were the fastest growing group, Trowbridge Deloitte partner James Hickey said.
“The lump sum is the most popular draw down type in this emerging sector, whilst 70 to 80 years olds dominate the increasing use of regular draw downs. Of the $520 million worth of settlements in 2006, more than 80 per cent were lump sum and just fewer than 20 per cent were taken in regular draw downs,” Hickey said.
Variable rates are the most popular type of loan, but the research found an increasing use of fixed rate borrowings with a quarter of new loans fixed rate compared with 22 per cent in 2005 and 5 per cent in 2004.
Reverse mortgages have grown more in capital cities than regional areas in the past six months. New South Wales has 40 per cent of the market.
Couples and single females were the most common borrowers, although single male borrowers had increased to account for 20 per cent of settlements, up on the previous two years, the research found.
“This growth coincides with an increase in the number of product providers, providing improved product flexibility and wider distribution channels,” Hickey said.
