Reverse Mortgages and Older People: Growth Factors and Implications for Retirement Decisions [Final Report]

In Australia, as in other OECD countries like the UK, there is interest in a closer examination of reverse mortgages as a resource for long-term care, home modification, home maintenance and supplementary income. Housing wealth can be viewed by low-income older homeowners and by governments as an asset that potentially can be used for purchasing support services or supplementing income. The key aims of the research are to understand and explore the following three key objectives: What is the nature of the reverse mortgage industry in Australia at present? What factors have influenced growth in the use of reverse mortgages by older persons? How does the use of reverse mortgages influence retirement decisions and planning? The project sought to determine the factors influencing the take-up of reverse mortgage products and services within the context of overall demand. This is significant because many baby-boomers have housing assets worth over half a million dollars and a more comfortable retirement may be possible when the age pension can be supplemented by equity release from the family home which is currently exempt from the pension means test. This research project focuses on provision of a comprehensive appraisal of reverse mortgages as they pertain to ageing in place and community care decision-making. The primary elements of the research approach were a product review; focus groups with older people; a survey of reverse mortgage practitioners; and interviews with lenders (see below). Importantly, while there is considerable state and Australian government interest, reverse equity product development has mainly been left to the banks and financial providers themselves, with the exception of the Commonwealth Centrelink equity-based pension2 and smaller state-based programs such as the Queensland Home Adapt Loan (QHAL). Thus this research is founded on a partnership with SEQUAL so as to access this larger market knowledge. SEQUAL is the peak body for all lenders committed to the equity release proper process and all members are signatory to SEQUAL's code of conduct. SEQUAL represents the vast majority of reverse mortgage lenders in Australia and as partners in the research provided access to their internal research reports and membership, enabling us to access reputable reverse equity providers. This partnership facilitated us in answering questions concerning the range of reverse mortgage products available from SEQUAL members, including their criteria for lending, value and the intended purpose as stated by older people at the time of the loan arrangement being established.