The reverse mortgage market continued its exponential growth last financial year, but housing market downturns, especially in NSW, tempered the surge, according to the latest SEQUAL/Trowbridge Deloitte Reverse Mortgage Market Study.
Reverse mortgage numbers grew by 67 per cent in the twelve months to June 30 this year, with $520 million in new loans, or ‘settlements’. However, growth slowed in the second half of the financial year to only 20 per cent.
Kieren Dell, SEQUAL’s executive director, said this downturn came largely from the malaise in the NSW housing market. While still the largest segment, the NSW share of the reverse mortgage market dropped from 41 per cent last financial year to 32 per cent this year on the back of sluggish housing growth.
While Victoria, Queensland and Western Australia all recorded strong growth, the drop in “powerhouse driver” NSW had a lasting effect, he said.
“I think part of the reason is that … the housing market hasn’t moved ahead as strongly in NSW, certainly as it has in WA and probably Queensland in particular, but also all the talk that we had in NSW about NSW perhaps being in recession and not growing as fast at the other states [hasn’t helped].
“What that probably says is that people use these products when they’re a bit more confident.”
“When people have got confidence about the property market, and they’ve confidence in the economy of their state, their more inclined to use a reverse mortgage.”
In a more reassuring trend, Dell said the percentage of borrowers under 65 dropped from 20 per cent in 2006 to 13 per cent in 2007.
The number of financial planners involved in selling equity release products also jumped, going from almost zero three years ago to nine per cent of the market in the first half of this financial year.
James Hickey, a partner at Trowbridge Deloitte, said, “The continued involvement of financial planners is critical to ensuring the reverse mortgage market emerges as a genuine retirement product option for Australians”.
Dell also said increased planner involvement meant continued strong education standards.
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