CPA Australia has teamed up with the Senior Australians Equity Release Association of Lenders (SEQUAL) to promote the benefits of reverse mortgages and dispel some myths surrounding the emerging products.
The two associations have jointly developed a guidance note to help CPA members better understand the products, assess the risks and evaluate the benefits when advising clients.
The alliance represents the first of its kind for the professional accounting body.
Both Kath Bowler, financial planning policy adviser at CPA, and Kieren Dell, executive director of SEQUAL, are keen to debunk what they describe as negative myths surrounding reverse mortgages, including concerns about negative equity and impacts on social security and pension payments.
Attempting to move away from the more negative assumptions about reverse mortgages, Kath Bowler said they are trying to help planners recognise there is a legitimate value in the product.
“It’s important that our advisers understand the nuances of reverse mortgages and provide the most accurate advice to their clients, who can then make informed decisions.
“When used in the right circumstances, reverse mortgages can be a very effective product for older Australians,” Bowler said.
According to Kieren Dell, many of the concerns about the uptake of reverse mortgages in Australia are a result of some of the prominent mishaps that occurred in the United Kingdom, where they have been in use for over 40 years.
Dell stressed that the Australian situation is fundamentally different, with different markets and intrinsically different products in the two countries.
One example he cited was the use of protection equity options in Australia, which have not been a feature implemented within the UK.
Dell said that Centrelink and the Australian Securities and Investments Commission have been familiarising themselves with the products, and as a result he expects the Government to become more active in working with the industry to educate consumers.
Growth of the Australian reverse mortgage market is between 30 and 50 per cent on an annualised basis.
He said that planners are now beginning to recognise this growth and the potential it represents, with over 50 per cent of dealer groups now having approval lists that accommodate reverse mortgages, up from almost none two years ago.
