Reverse Mortgage Loan Blog

Although the reverse mortgage market grew strongly in recent years, a new Datamonitor report has shown signs that the sector is slowing down.

The Reverse Mortgages in Australia and New Zealand 2007 report found reverse mortgage advances increased by $385 million over two years, representing more than $624 million in 2006. But against that, the sector is only expected to grow a further $36 million in 2007, or a small six per cent growth on the previous year.

Kieran Dell, executive director at SEQUAL, said the amount of reverse mortgages in NSW had reduced by 32 per cent in the year up to June.

The Datamonitor report attributes the slow down to rising interest rates, an uncertain property market and the global credit crunch.

“Uncertain property markets were probably more of an issue earlier in the year, we saw the share of NSW reverse mortgages drop significantly as a result of that market, whereas WA has expanded,” Dell said.

However Petter Ingemarsson, financial services analyst, said the long-term prospects for reverse mortgages remain favourable.

Datamonitor has predicted reverse mortgage advances could reach $1.2 billion in 2011, amounting to a growth rate of 15.5 per cent from 2007.

Ingemarsson said wide spread insufficient retirement funds, rising property values and an aging population with encouraging health allowing them to be more active in their retirement would provide growth opportunities in the future.

The report found Australia has 26 lenders compared to only six providers three years ago, but with more competition and decreasing margins could result in the amount of lenders significantly drop.

“The Australian reverse mortgage market is currently oversupplied with lenders. Competition has increased and margins have tightened, and some lenders are expected to exit the market,” Ingemarsson said.

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