Reverse mortgages and older people: growth factors and implications for retirement decisions
Authors: Catherine Bridge, Mark Mathews, Peter Phibbs and Toni Adams
Published: 30th September 2009
Residential property represents the largest single asset class for older Australians. For many of these older Australians, the equity in their homes provides a financial opportunity to households who are asset rich but income poor. Population ageing is likely to increase demand for innovation in housing and financing products.
Currently, equity associated with homeownership can be accessed in later life by property sale or through a range of products developed by the financial sector, which offer a financial benefit in exchange for this home equity. The main product types include traditional home equity loans, which require regular payments; or an equity release product, which requires no repayment until death or voluntary relocation. The market potential has been estimated at 1.3 million households in Australia (Mitchell, Piggott, Sherris, and Yow, 2006). The most popular form of equity release product is the lifetime mortgage or reverse mortgage.
This positioning paper examines the issues and challenges of the reverse mortgage product and its potential policy risks and benefits.
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