Financial planner interest in the reverse mortgage sector has jumped by almost 10 per cent in the last 12 months, a new study has found.
According to the SEQUAL Trowbridge Deloitte Reverse Mortgage Study, more than nine per cent of credit business was placed directly by advisers in the last year.
SEQUAL [Senior Australians Equity Release Association of Lenders] executive director Kieren Dell said this figure is more than triple the amount for the same period for 2006, which only registered a two per cent planner involvement.
In 2005, there was zero interest from advisers in the sector, Dell said.
“It’s good to see it jump so sharply. Basically two years ago on the graph it didn’t register financial planners,” he said.
“Last year we barely saw a slither at about 2 per cent. Now we’re talking about a significant chunk; about nine per cent is placed by financial planners.”
Dell said the nine per cent could even be higher, with the credit business placed by a broker, probably also having planner involvement.
“It’s actually probably a higher number than that because a number of the business that’s placed by brokers, we’d imagine that a portion of that also involves a planner,” he said.
Dell said in his view, the reverse mortgage sector has reached a point where the majority of advisers understand that a reverse mortgage is a viable option for investors in certain circumstances.
“It’s quite encouraging to see financial planners are now starting to realize how they can use these products sensibly with their clients,” he said.
The study also found the reverse mortgage market has more than 31,500 reverse mortgages loans with total outstanding lending of more than $1.8 billion, as at 30 June 2006.
“The interesting thing was that the growth was 67 per cent over the last 12 months and it was 43 per cent annualized over the last six months, so it’s actually a bit slower in the last six months,” Dell said.
“The growth is probably a little bit less than expected. Although part of the reason its actually less than expected is that there are quite a few people that are paying out their loans, even more than we might have expected. And that’s because they’re using them for short term purposes.
“Yet despite the slow in growth, Dell said the reason for it is growing more strongly is that people are becoming more comfortable with it and also as more baby boomers are moving into retirement and with small levels of superannuation they’re finding that they’re needing to supplement the pension and so on.”
The study is Trowbridge Deloitte’s third comprehensive study of the reverse mortgage sector today. The study was commissioned by SEQUAL.
