Reverse Mortgages Gain Popularity Among Australian Seniors

Seniors in Australia are increasingly turning to reverse mortgages to boost their income, pay off debts, and fund home renovations, according to a study by Royal Bank of Scotland (RBS) and Deloitte. The study of 425 retirees found that 32% of funds from reverse mortgages were used to repair and renovate homes, while 18.7% was used to supplement income and 6.6% to assist family members. Reverse mortgages, which allow homeowners to borrow against the equity in their homes, have become a significant market in Australia, with RBS holding a 40% share.

Key Takeaways:

• 32% of funds from reverse mortgages were used to fund home repairs and renovations, highlighting the popularity of the product among seniors looking to upgrade their living spaces.
• 18.7% of funds were used to boost income, suggesting that many seniors rely on reverse mortgages as a source of additional income in retirement.
• 6.6% of funds were used to help family members, demonstrating the generosity and willingness to support loved ones among seniors using reverse mortgages.
• The average value of reverse mortgages held by respondents was A$60,000 (US$49,296), indicating significant sums are being borrowed.
• Debt repayment had become the No.1 reason for retirees taking out a reverse mortgage, according to a separate industry-wide study.
• The A$2.5 billion reverse mortgage market posted a 23% rise in the number of loans nationwide last calendar year to 37,500.
• Lump sum payments accounted for 97% of drawdowns, with settlements reaching A$141 million in 2008.
• The average reverse mortgage size is now A$66,000, with single women averaging A$74,300.
• Couples account for almost half of all new loans, with an average age of 74.
• Martin Lynch, head of reverse mortgages at RBS, noted that respondents held reverse mortgages with an average value of A$60,000 (US$49,296).

Statistics:

• 32% of funds from reverse mortgages were used for home repairs and renovations.
• 18.7% of funds were used to boost income.
• 6.6% of funds were used to help family members.
• 6% of funds were used to consolidate existing debts.
• A$2.5 billion: the size of the Australian reverse mortgage market.
• 37,500: the number of reverse mortgages outstanding nationwide last calendar year.
• 23%: the rise in the number of reverse mortgages in Australia last year.
• A$141 million: the value of settlements in lump sum payments in 2008.
• A$66,000: the average reverse mortgage size.
• A$74,300: the average reverse mortgage size for single women.
• 74: the average age of borrowers.
• 97%: the percentage of lump sum payments in drawdowns.
• 40%: the share of the reverse mortgage market held by RBS.

Sources:

• Royal Bank of Scotland (RBS) and Deloitte
• Deloitte Actuaries and Consultants
• Senior Australians Equity Release Association of Lenders (SEQUAL)