Fresh data shows the burgeoning Australian reverse mortgage market plummeted in 2007.
Rising interest rates, uncertain property prices and the global credit crunch led to decelerating growth rates, according to a report released last week from London-based research agency Datamonitors.
Total reverse mortgage advances in Australia grew from $239 million in 2004 to $624 million in 2006, corresponding to an average yearly growth rate of 61.7 per cent.
In 2007, total reverse mortgage advances are expected to reach $660 million, which corresponds to just 5.8 per cent growth over the previous year.
The Australian reverse mortgage market has around 26 lenders, up from six providers in 2004.
Datamonitors said the market would need to be three to four times as large in order to profitably sustain that number.
"The Australian reverse mortgage market is currently oversupplied with lenders," Datamonitors financial services analyst and the report's author Petter Ingemarsson said.
"Competition has increased and margins have tightened, and some lenders are expected to exit the market."
Of almost two million eligible Australian households, only around 31,500 currently have a reverse mortgage, corresponding to a 1.6 per cent market penetration.
The research agency forecasted reverse mortgage advances to reach $1.2 billion in 2011, corresponding to an annual average growth rate of 15.5 per cent from 2007.
"[The] long-term prospects for this product are still favourable," Ingemarsson said.
