Planners uninterested in reverse mortgages
The reverse mortgage market is returning to 2008 levels, but financial planners are missing in action, according to Senior Australians Equity Release Association of Lenders (SEQUAL) chief executive Kevin Conlon (pictured).
Research commissioned by SEQUAL and conducted by Deloitte revealed that as at December 31, 2010, the reverse mortgage market in Australia consisted of more than 41,000 reverse mortgage facilities with total outstanding funding of $3 billion (growth of 11 per cent over the 12 months from December 31, 2009). Deloitte Actuaries and Consultants partner James Hickey said that settlements were at $320 million as at December 2010 (a 22 per cent increase from 2009) and more than 5,600 new borrowers accessed the equity in their homes in 2010. Hickey said the figures showed that the market was bucking the downward trend seen during the global financial crisis.
Conlon said it was a robust market considering that there were now fewer providers, and was pleased to note that people were only borrowing what they needed. However, he said SEQUAL believed that borrowers needed advice and yet financial planners seem to have dropped the ball when it came to reverse mortgages.
The research showed that more people were accessing reverse mortgages directly (70 per cent) rather than going through a broker or financial planner (30 per cent).
“A lot of work needs to be done to ensure that consumers are getting the advice that they need to make informed decisions around equity release,” said Conlon. “The broker market did take up the slack there, but now really is the time for financial planners to engage with clients approaching retirement to understand that the bulk of their wealth is tied up in the family home and that equity release strategies are legitimate options to better fund their retirement.”
Hickey said financial planners could also use reverse mortgages to help their clients preserve their super funds longer in a tax effective haven.
Conlon said consumers needed equity release products and yet planners were showing very little response to that demand.
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