Researchers from the University of New South Wales (UNSW) Business School will investigate behavioural and other issues behind the low uptake of reverse mortgages in Australia.
Reverse mortgages are loans that enabled homeowners to access their home equity, allowing the homeowner to borrow without having to make repayments while living in the home.
Home equity was typically the largest component of total household wealth, which meant reverse mortgages could complement superannuation and the age pension as a financial resource in retirement.
Dr Katja Hanewald, senior research fellow, and Professor Hazel Bateman would investigate theoretical and empirical aspects of reverse mortgage demand and product design.
“While economic theory predicts that households would demand reverse mortgages to improve retirement funding, the take-up rates for reverse mortgages are low in Australia and internationally,” said Dr Hanewald.
The business school is funding the two-year research project with industry partner Household Capital.
“Combining our research track record and Household Capital’s industry expertise, we will design, and field test, an online experimental survey to study the role of mental accounting in the demand for reverse mortgages,” Dr Hanewald said.
“By investigating behavioural explanations to the ‘reverse mortgage puzzle’, this research will address demand and supply side barriers to further development of a reverse mortgage market in Australia and internationally.”
Dr Joshua Funder, chief executive of Household Capital, said the study would be useful to better understand how to improve access to home equity.
“Overseas markets have been expanding rapidly to provide access to home equity to fund retirement,” Funder said.
“We’re delighted to work with UNSW Business School to understand the needs of Australian retirees and how we can improve access to home equity to improve retirement their funding.”