By Drew Cratchley
The reverse mortgage market continued to grow through the global financial crisis but at a slower rate than previous years, research shows.
The latest study of the Australian reverse mortgage market by Deloitte Actuaries and Consultants and industry body Senior Australians Equity Release Association of Lenders (SEQUAL) shows market growth of five per cent in the six months to June 30.
Reverse mortgages totalled $2.61 billion, with 38,048 loans on issue.
That compares to a $2.5 billion market at December 31 last year, after a six month period of 23 per cent growth.
There were 2,350 new borrowers of reverse mortgages in the first half of 2009, down from 2,600 in the second half of 2008.
One in seven existing borrowers drew down additional funds from their facility in the six months to June, with an average drawdown of $10,900.
Reverse mortgages - when home owners borrow against the equity in their homes - were launched in Australia earlier this decade. They are issued primarily through major banks, building societies and financial planners.
"We do see the market growth slowing from what it had been in the past, and that is largely a reflection, quite naturally, of the broader economic environment that reverse mortgages operate in, especially over the first six months of the calendar year," Deloitte's James Hickey said.
The average age of reverse mortgage borrowers remains 74, but the proportion of new loans issued to those aged under 70 continues to increase, the study shows.
The leading reason for taking out such a loan is to access a regular income in support of superannuation, followed by debt repayment and home improvement.
SEQUAL chief executive Kevin Conlon said the average borrower took out about 70 per cent of what was available to them, showing senior Australians were showing constraint.
"They're making informed decisions, they're mapping their requirements and they're borrowing what they need rather than what they desire or what's made available to them," Mr Conlon said.
The study also showed that 10 per cent of borrowers voluntarily repay their reverse mortgage each year.
"This is an important finding as it shows that such borrowers are only being exposed to reverse mortgage compound interest for a relatively short period of time," Mr Hickey said.