More retirees are likely to seek mortgage refinance by taking out a reverse mortgage in the future, according to an industry body.
A reverse mortgage is a loan taken out against the equity in a home and is available to homeowners over the age of 60. No repayments are then required until the house is sold.
The Senior Australians Equity Release Association (SEQUAL), an industry body for the reverse mortgage market, pointed to data from Deloitte that indicates the numberf loans is up seven per cent at December 31st 2010 compared to a year earlier.
The value of outstanding reverse mortgage loans as of December 31st was $3 billion and the figures also show the average size of loans is increasing steadily, up to nearly $72,500 at the end of 2010.
“Reverse mortgages, or variations of them, are going to be as common as borrowing a home loan from a non-bank lender,” predicts SEQUAL chief executive Kevin Conlon.
He sees the proportion of retired people taking out a reverse mortgage growing from the current two per cent to between five and ten per cent as the population continues to age.
“Many people are approaching retirement having concentrated their wealth in the family home and, whilst that has served them well in terms of wealth creation, when they get to retirement they find themselves asset rich and cash poor,” he remarked.
The Deloitte data shows the cash from reverse mortgages was used as a source of income (18 per cent), for home improvement (15 per cent), debt repayment (13 per cent), purchasing gifts (three per cent), travel (1.5 per cent) and cars (1.3 per cent).