This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.

Bookmark Email Print page

Australia’s reverse mortgage market reached $3.3bn at 31 December 2011


DOWNLOAD  

4 June 2012: Professional Services firm Deloitte released its 10th comprehensive study of the Australian reverse mortgage sector today. Commissioned by the Senior Australians Equity Release Association (SEQUAL), the study shows that at 31 December 2011 the reverse mortgage market in Australia consisted of more than 42,000 reverse mortgage facilities with total outstanding funding of $3.3 billion. This represents 10% growth in the value of new lending over the 12 months from 31 December 2010 and 22.5% growth in the last 24 months.

James Hickey, Deloitte banking partner, who led the study, said that there were 5,000 new borrowers accessing the equity in their homes in 2011. “With settlements worth $317m, the volume of new lending has remained steady over the past two years.

“The average size of each loan increased to $78,250 (from $72,500 in 2010). When we initiated this study on behalf of SEQUAL in December 2005, the average loan size was $51,148.

“Although the appetite for this equity release product continues to grow, settlements have not yet returned to the levels experienced in the peak years of 2006 and 2007, prior to the Global Financial Crises,” Hickey said. “Even so growth remains steady and a number of significant lenders remain active in the market."

John Thomas, Chairman of SEQUAL, the peak industry body that governs equity release providers and determines consumer safeguards, said: “The majority of equity release customers (50%) are couples between 70-75 years old who have accumulated wealth through home ownership. They mainly use their released funds to undertake home improvements (18%), repay debts (16%) and supplement their retirement income (15%) following a decision to ‘stay at home’ during their retirement.

Summary of key findings

  • Market by value of new lending has grown 10% in last 12 months
  • Market growth of 22.5% of value of lending in the 24 months to December 2011
  • Variable rate loans were the most popular
  • Full discharge rate of 9.4% p.a. is driven by sale of property and voluntary repayments
  • Additional drawdowns approximately 4.1% of outstanding loans
  • Lump sum is the most popular type of draw down
  • Direct sales were the largest channel in 2011 at 74% followed by Brokers & Planners 26%
  • As proportions of outstanding loans by number:
    • NSW 35% of market
    • QLD 20%
    • VIC 18%

Commentary

John Thomas pointed out that SEQUAL is comprised of major banks and specialist non-bank providers. He said: “I believe releasing home equity to fund retirement will continue to grow as the Australian population ages. Given our ageing demographic the Government’s emphasis on ageing couples remaining at home for as long as possible is likely to support this.”

Hickey noted that the results show that younger borrowers still utilise larger proportions of their available facility with an average 9% loan to value ratio for those aged up to 65 years where there is an average maximum LVR available of 14%. Those aged over 80 however only accessed an average of 20% LVR against an average maximum of 34%.

Thomas reaffirmed that SEQUAL and its members are committed to appropriate product design, high standards of practice and responsible borrowing. “The effective use of a combination of lump sum and income stream options enable borrowers to borrow what they want, when they need it,” he said.

“It is important that consumers make informed decisions and carefully consider how their needs may change over time,” he added.

Thomas emphasised that SEQUAL’s industry accreditation protocol, raises professional standards above the minimum education requirements imposed by legislation and industry association membership. SEQUAL has established a national network of accredited Seniors Equity Release Consultants (SERC) which assist consumers make informed decisions about equity release strategies.  

He welcomed the encouragement provided by both industry sector associations and market regulators for the meaningful contribution SEQUAL has made towards the establishment of an efficient and ethical seniors equity release market in Australia.

For more information about SEQUAL® approved lenders and reverse mortgages go to www.sequal.com.au

Last Updated: 

Contacts

Name:
Louise Denver
Company:
Deloitte
Job Title:
Director, Corporate Affairs & Communications
Phone:
Tel: + 61 2 9322 7615, +61 4 1488 9857
Email
ldenver@deloitte.com.au
Name:
James Hickey
Company:
Deloitte Australia
Job Title:
Partner, Financial Services
Phone:
Tel: +61 2 9322 5009
Email
jahickey@deloitte.com.au

Share

 

 

Follow us



 

Talk to us