The market value of reverse mortgage products had more than doubled from $459 million in December 2004, according to the study commissioned by the Senior Australians Equity Release Association of Lenders (SEQUAL). The study, which will be updated every six months by actuarial firm Trowbridge Deloitte, flagged a growing popularity for reverse mortgages to be used as an income stream, however, 80 per cent of loans were still used as lump sum payments. The average amount accessed is around $53,000.
SEQUAL executive director Kieren Dell said regular draw downs were preferable to lump sum withdrawals. "It is often preferable for retirees to draw down funds on a regular basis in order to better manage interest, which accumulates at a slower rate than with a lump sum draw down", Dell said.
Expenditure and use of the funds were areas the study would delve into further in the future, he said. Couples account for around 45 per cent of the loans currently held, followed by single females at 40 per cent and single males at only 15 per cent.
About 75 per cent of the deals are made directly through a lender, such as a bank. However, the mortgage broker channel has doubled in the past 18 months, now accounting for around 25 per cent of the current market. In the first six months of 2006, mortgage brokers were responsible for 43 per cent of new loans. While deals made through financial planners remained small, this was likely to be because planners referred the job onto another provider, such as a broker, Trowbridge Deloitte partner James Hickey said.
The firm was currently surveying the top 25 financial planning firms to research how dealer groups used and recommended the products, Hickey said. SEQUAL represents 11 of the 16 reverse mortgage provider.
