Initial resistance from financial planners has given way to renewed interest in reverse mortgages, according to the Financial Planning Association.
The FPA’s Policy and Government Relations manager John Anning said the turnaround is in the wake of publicity about the equity retirement tool and increased interest from clients.
“They see it as an option that people will be asking about in their retirement strategies,” Anning said.
A new survey has backed the association’s findings.
Actuary group Trowbridge Deloitte surveyed 24 major planners and found almost all provide reverse mortgage products, while half believe they will be an important financial planning tool over the next two years.
“This is a significant change to last year when many financial planning dealer groups were either unaware of the product or thought it would take more than three years to gain any support,” Deloitte Partner James Hickey said.
Bluestone Equity Release, a provider of reverse mortgage products commissioned the survey.
Planners said quality and training were key factors in choosing the tool and poor advice was flagged as the biggest risk.
Reverse mortgages allow consumers aged over 60 to borrow cash against the value of their home, with repayments delayed until they move into care, sell or die.
Interest is compounded and loan amounts vary between 15 to 40 per cent of the value of the home.
They have increased 50 per cent per year since 2004 and now total $1.1billion. NSW makes up 50 per cent of the market and the average loan size is $53,300.
