In its annual Reverse Mortgage Report, Deloitte found that the Australian reverse mortgage loan book grew by more than 3 per cent in 2014 to $3.66 billion. However, this is a small proportion of the estimated $500 billion of home equity held by Australians aged over 65.
Author of the report and Deloitte partner of financial services, James Hickey, said financial advisers and other financial service providers could help retirees access these potential funds.
“Being aware of equity release options and how they work requires both support and education. We believe banks, insurers, qualified financial advisers and superannuation funds are best placed to embrace, understand and educate Australians on the options available with equity release products,” he said.
“These are the groups seeking to help their customers aged 65-plus to navigate their retirement with the dual challenges of longevity and income sustainability. Bringing what is often their most substantial asset, their home, into such discussions must be in the best interests of everyone.”
There are almost 40,000 reverse mortgages on issue in Australia, with an average loan size of $92,000, up from $86,000 in 2013, according to the report.
“The top three uses for the released equity remain debt consolidation, supporting an income stream and home improvements. However, this year there was renewed interest in how the product could be structured to support financial needs for aged care accommodations,” Mr Hickey said.
The report also found that about 3,400 new borrowers took out a reverse mortgage in 2014. In addition to new borrowers, 4,900 borrowers voluntarily repaid their reverse mortgage loan in 2014 – about 12 per cent of total borrowers.
“This shows 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,” Mr Hickey said.
Due to the differing licencing regimes, most financial planners are not licensed to provide advice on Credit products such as reverse mortgages.
Equity Release advisers such as Reverse Mortgage Financial Solutions are often asked by planners to assist older clients to meet their retirement income needs.