Kennett predicts more equity release failures
Former Victorian Premier Jeff Kennett has warned that some current reverse mortgage providers will fail in what he predicts will be a burgeoning market.
His warning came as Dutch-based investment bank ABN Amro announced it had launched its own equity release product in Australia.
Kennett, who is the chairman of reverse mortgage company Australian Seniors Finance (ASF), said initial research that indicated the reverse mortgage market could be worth up to $1 billion was very conservative.
He now believes the market could be worth up to $2.5 billion, but warned that some of the current players in the space will not survive.
“We have run this business very lean and some of the current players will find it hard to continue with their overheads,” he said.
Although ASF said it had sold 1,000 reverse mortgage loans in its first year of operation, which was ahead of its forecasts, the Melbourne-based company has yet to move into profit.
Managing director John Thomas said AFS was looking at securitising its loan book, probably through the Commonwealth Bank, which is the company’s mortgage fund source.
ABN Amro, meanwhile, said its reverse mortgage type equity release product would be sold through financial planners.
The product launch came as the Australian Securities and Investments Commission (ASIC) issued a report outlining its stance on equity release products. Their soaring popularity and the recent collapse of one offerer, Money For Living, has prompted new calls from ASIC for increased regulation of the mortgage broking industry.
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