Reverse Mortgage Loan Blog

Senior Australian are taking up reverse mortgages to pay down debt, fund home improvements and supplement their income in retirement, a study by Royal Bank of Scotland (RBS) and Deloitte finds.

The study of 425 retirees found 32 per cent of funds from reverse mortgages were used to fund home repairs and renovations, 18.7 per cent was used to boost income and 6.6 per cent was used to help family members.

Another six per cent was used to consolidate existing debts.

Reverse mortgages, when outright home owners borrow against the equity in their homes, were launched in Australia earlier this decade and are sold primarily through financial planners and brokers.

RBS holds a 40 per cent share of the reverse mortgage market, and the survey was conducted last December.

It found respondents held reverse mortgages with an average value of $60,000, RBS head of reverse mortgages Martin Lynch said.

A separate industry-wide study, based on 37,500 existing borrowers and 2,600 new borrowers in the December 2008 quarter, found debt repayment had become the No.1 reason for retirees taking out a reverse mortgage.

That study, by Deloitte Actuaries and Consultants and industry body Senior Australians Equity Release Association of Lenders (SEQUAL), was the sixth in a series and included data supplied by RBS.

Deloitte spokesman James Hickey said on Monday that debt repayment, home improvement and retirement income continued to be the top reasons for seniors taking out a reverse mortgage.

The $2.5 billion market posted a 23 per cent rise in the number of reverse mortgages nationwide last calendar year to 37,500, Deloitte said.

Lump sum payments accounted for 97 per cent of drawdowns, with settlements reaching $141 million in 2008.

The average reserve mortgage size is now $66,000 although that average rises to $74,300 for single women.

Found here.

Bookmark It