Banks fail seniors – where are the Reverse Mortgage lenders?

by Darren Moffatt on November 7, 2013

  • Sumo

What started out as a fringe issue in the banking system is quickly developing into a major headache for many Australian pensioners. I’m talking of course about the limited availability of reverse mortgage loans. I last wrote about it HERE, but things are much worse now, and there’s a case to be made that banks are failing seniors.

Five years ago we had more than 20 lenders operating in Australia, with reverse mortgage loan products available to borrowers as young as 60 years (and for a while, 55).

Now there are just a handful of active lenders in the market. The remaining few banks and lenders who offer reverse mortgages, have tightened up the criteria so that in most cases a minimum age of 65 years is required FOR BOTH BORROWERS (although one lender will often lend from the age of 63).

This has made releasing equity much harder for young retirees and people approaching retirement, in particular.

As a reverse mortgage broker we’ve always received enquiry from people who unfortunately don’t qualify. However, recently the sheer number of people who are now calling us because they cannot access this finance  has jumped significantly.

I put it down to several factors:

a) The demographic trend of our ageing population is now really kicking in. For the next 20 years or so, an additional 200,000 people will turn 65 each year. Simply put, we’re experiencing the beginnings of a sharp exponential rise in the number of people retiring.

b) Low interest rates and decimated share portfolios since the GFC. More of those people entering retirement are doing so with lower than anticipated incomes.

Clearly there is a strong & increasing demand for home equity release financial products. The problems confronting senior Australians are also a massive opportunity for mortgage lenders.

So to my question:  where are the banks?

Of the thirty or so banks currently operating in Australia, only THREE are active in the reverse mortgage market.

That’s right. Three. What’s going on?

When confronted with such a compelling market opportunity, the banks are normally in there quick-smart. Unfortunately, the reality for seniors is that Aussie banks keep piling on record profits and just simply don’t need to get into reverse mortgage lending. Yet.

My guess, for what it’s worth, is that this will change pretty quickly when the credit growth slows again and the easy revenue from the conventional home loan market recedes. At that point banks will be looking for another home loan growth engine, and what better than a huge wave of retiring baby boomers with a real problem?

Unfortunately for pensioners and retirees, this may take some time yet. In the meantime, many will just have to ride it out and wait until they’re old enough to qualify.

If you want to check if you qualify, or find which lender is best please email me [email protected] or call  1300 745 745.

Let’s hope some more options become available soon!


{ 4 comments… read them below or add one }

Alexander and Lorraine Gibson January 28, 2014 at 6:05 pm

We would like your comment on who are the best lenders for Reverse Mortgage. My husband is 76 and I am 72 and we feel the need to look into this possibility of gaining some ready cash. Any help you can give to us would be very much appreciated.
Many thanks

George And Helen Wilson March 1, 2014 at 3:42 pm

We are a pensioner couple both 71 years old, we would like to organise a reverse mortgage draw down facility on our home which we own outright. We value our home at a conservative $430000 and only wish to draw down when necessary for unexpected expenses

Beth Randall July 17, 2014 at 10:34 am

Good morning
I am assisting a friend in sourcing a Lender that does Reverse Mortgages. I am somewhat surprised at your statement that only 3 Banks do this type of mortgage. Maybe I am wrong but in a short period of time I have come up with: CBA, Bankwest, St George, Bendigo Bank and Macquarie. Is there false advertising by these lenders or am I missing something crucial.
I would appreciate your comments.

Lorraine O'Brien August 25, 2014 at 8:25 am

My 76 year old mother is thinking about a reverse mortgage to assist her young grandson who is in a financial bind (about $70,000). Would really appreciate some assistance with a recommendation for a Mortgage broker to discuss reverse mortgage and consequences.
Please call me on 0449 778 208 to dicuss.

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