Advisers to educate retirees on reverse mortgages
Advisers are well placed to provide retirees with the information they need to make a decision about using reverse mortgages to fund their retirements, a report says.
The annual Deloitte Reverse Mortgage Report, found that the Australian reverse mortgage loan book grew by three per cent in 2014, but at $3.66 billion, represented a small fraction of the estimated $500 billion of home equity held by Australians over 65 years.
Report author and Deloitte partner financial services, James Hickey, said advisers could plan a key role in helping seniors unlock the equity in their home through these products.
"Being aware of equity release options and how they work requires both support and education," he said.
"We believe banks, insurers, qualified financial advisers and superannuation funds are best placed to embrace, understand and educate Australians on the options available with equity release products.
"These are the groups seeking to help their customers aged 65 plus to navigate their retirement with the dual challenges of longevity and income sustainability. Bringing what is often their most substantial asset, their home, into such discussions must be in the best interests of everyone."
The report found there were 3,400 new borrowers using reverse mortgages in 2014, with the average reverse mortgage loan rising to $92,000 — from $86,000 in 2013 — while almost 5,000 borrowers voluntarily repaid their reverse mortgage loan early.
Hickey said the Government reforms around aged care had been a factor in increasing retiree interest in the loans.
"The top three uses for the released equity remain debt consolidation, supporting an income stream and home improvements," he said.
"However, this year there was renewed interest in how the product could be structured to support financing needs for aged care accommodation bonds.
"The changes to aged care accommodation payments that came into effect 1 July 2014 with the Living Longer, Living Better reforms, have generated additional interest in how reverse mortgages can play a far greater role in assisting senior Australians navigate one of the most stressful stages of retirement, that of financing the accommodation bond."
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