Reverse mortgages push forward
According to the results of a recent study, the booming reverse mortgage market holds increasingly lucrative opportunities for both financial planners and mortgage brokers.
Around 20,000 Australian households have a reverse mortgage, with research released by the Senior Australian Equity Release Association of Lenders (SEQUAL) showing the market was valued at $1.1 billion at June 30, 2006.
The study of 20,000 reverse mortgages provided by SEQUAL members across Australia was conducted by actuarial firm Trowbridge Deloitte.
It found the market had more than doubled in the past 18 months from $848 million at the end of last year and $459 million in 2004.
Potential opportunities for financial planners lie in the fact that the dominance of direct providers of reverse mortgage products, such as banks, is decreasing.
Mortgage brokers’ share of the market at June 30, 2006, was 43 per cent, increasing from 38 per cent of all loans in 2005 and 17 per cent in 2004.
“This trend demonstrates the value customers are placing on advice and assistance when purchasing reverse mortgage products,” said Trowbridge Deloitte partner James Hickey.
“Although most retirees secure reverse mortgages directly from lenders … the use of intermediaries will continue to grow as financial planners become more involved in the sector.”
New South Wales is strongly represented in the research, with 45 per cent of reverse mortgages in this state, Victoria and Queensland each accounted for 20 per cent, while Western Australia grew to 7 per cent from a low base of just 4 per cent in 2004.
South Australia was not represented in the study because of a conflict between SEQUAL membership restrictions and the South Australian mortgage broking code of practice.
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