Deloitte Australia’s Actuaries & Consultants released its seventh comprehensive study of the New Zealand reverse mortgage sector this week.
Supported by New Zealand’s Safe Home Equity Release Plans Association (SHERPA), the study found New Zealand’s reverse mortgage market comprised 5,300 loans, with a total book of $444 million as at 31 December 2013, compared with 6,613 loans valued at $447 million four years previously.
Deloitte partner financial services James Hickey said the New Zealand reverse mortgage market has been stagnant for some time.
“Unfortunately, this presents a very real risk that New Zealand seniors are in danger of missing out on the opportunity to live a more comfortable retirement, at home,” Mr Hickey said.
“While downsizing is perhaps the obvious option to release money in the home, for many retirees it is too great an emotional and social upheaval to just sell the family home and move to a different location,” he said.
“Having an option to live in their home for longer, but being able to tap into the equity in the property via a reverse mortgage, could be much more preferable for such retirees.
“Kiwi baby boomers need all available options if they are to secure a financially comfortable retirement.”
Rob Dowler, executive director of SHERPA, said the market size is on a par with pre-GFC levels, while the size of each borrowing has increased the number of both borrowers and settlements is significantly down.
“This is largely due to fewer lenders offering the product for sale,” Mr Dowler said.
“However things are beginning to change,” he said.
“At SHERPA we are fielding more interest in the product from potential borrowers and lenders.
“As the drag on growth caused by uncertain and pressured global business environment begins to ease, we think the home equity release market will pick up along with the need for new business opportunities.”
The majority of borrowers in New Zealand are couples (more than half), borrowing around $10,000 more than their single counterparts. The report found many new borrowers are ‘younger’ retirees between the ages of 65-74.