Table of Contents
- Overview
- Executive Summary
- Reverse mortgages in context
- Reverse mortgages allow asset-rich but cash-poor seniors to access the
equity in their home
- Borrowers use reverse mortgages in three different ways
- Three factors will contribute to the long-term growth of reverse
mortgages
- In Australia, reverse mortgage advances amounted to A$624m in 2006
- In New Zealand, reverse mortgage advances amounted to NZ$96m in 2006
- Reverse mortgage market growth has slowed down in 2007
- Reverse mortgages are still not mainstream products and are subject to
negative preconceptions
- Reverse mortgages have some unattractive aspects for mortgage lenders
and brokers
- The Australian reverse mortgage market has become more competitive
- Non-bank lenders have driven recent growth in the market
- CBA holds the greatest market share of reverse mortgage advances
- The New Zealand market has been shaken up by new entrants
- Competition is expected to increase
- Sentinel still holds a dominant market share of New Zealand reverse
mortgage advances
- Future trends of reverse mortgages
- Product evolution
- Competitive trends
- Reverse mortgage borrower trends
- Australian reverse mortgage advances will grow to A$1.2 billion in 2011
- New Zealand reverse mortgage advances will reach NZ$190m in 2011
- Table of Contents
- Table of figures
- Table of tables
- Reverse Mortgages in Context
- Reverse mortgages allow asset-rich but cash-poor seniors to access the
equity in their home
- Reverse mortgages are loans secured with property with no repayments
until the borrower moves or dies
- The no negative equity guarantee is an important feature of most
reverse mortgages
- Borrowers use reverse mortgages in three different ways
- According to a 2006 survey, the major uses of reverse mortgage funds
in New Zealand were for living expenses and home maintenance
- There are other financial products that can also be used to release
equity
- Reverse mortgages have been available in Australia for two decades
- Several factors have contributed to the development of reverse mortgages
- Aging populations have expanded the customer base for reverse mortgages
- Insufficient retirement incomes are forcing retirees to find
alternative ways to fund their retirement
- Property price growth has led to an increasing proportion of wealth
held as home equity
- Reverse mortgages still only make up a tiny fraction of lending
commitments
- In Australia, reverse mortgage advances amounted to A$624m in 2006
- Only around 1.6% of eligible senior households in Australia
currently hold a reverse mortgage
- In New Zealand, reverse mortgage advances amounted to NZ$96m in 2006
- Reverse mortgages have been introduced in Singapore, South Korea and
India
- Reverse mortgages were launched recently in India but have not yet
seen strong uptake
- Reverse mortgages have been offered for 10 years in Singapore
- Reverse mortgages were introduced in South Korea in 2004
- The growth in the Australian reverse mortgage market has slowed down in
2007
- Recent slowing property price growth and interest rate rises has made
borrowing less attractive
- Changes to the Australian superannuation system may have stalled
growth in reverse mortgages
- Reverse mortgages are still not mainstream products and are subject to
negative preconceptions
- Taking out a reverse mortgage may affect pension entitlements
- Other alternatives rival reverse mortgages
- Reverse mortgages have some unattractive aspects for mortgage lenders
and brokers
- Competitive Dynamics of the Australian Reverse Mortgage Market
- The Australian reverse mortgage market has become more competitive
- The margins on reverse mortgages have shrunk
- The Australian reverse mortgage market is oversaturated with lenders
- Non-bank lenders drive the growth in the market
- Once innovative features are now considered standard
- Fixed rate for life loans are now commonly available
- Flexible drawdown options are now offered by several lenders
- Protected equity options are available from most lenders
- Some lenders do not require the borrower to reside in the property
- Reverse mortgages have been securitized twice in the Australian
market
- The largest reverse mortgage lender in Australia is still CBA
- The five largest providers of reverse mortgages account for almost 80%
of the market
- Bluestone, ABN AMRO and Australian Seniors Finance achieved strong
market share growth
- Profiles of some key Australian reverse mortgage providers
- ABN AMRO
- ASF
- Bluestone Equity Release
- CBA
- OFG
- St.George
- Competitive Dynamics of the New Zealand Reverse Mortgage Market
- The New Zealand market has been shaken up by new entrants
- New lenders have entered the New Zealand market, while one lender has
exited
- The New Zealand market is not yet as competitive as the Australian one
- Fixed rates have been launched in the New Zealand market
- Regulation is expected in the New Zealand intermediary market
- Sentinel is still the dominant reverse mortgage lender in New Zealand
- Sentinel holds a 77% share of new reverse mortgage loans but has lost
share over the years
- Profiles of some key New Zealand reverse mortgage providers
- Bluestone NZ
- Dorchester
- Savings & Loans
- Sentinel
- Future Focus
- The reverse mortgage product is expected to continue evolving
- Fixed rates may become more common
- Reverse mortgages may have insurance components added
- Annuity type products may be introduced
- Drawdown facilities will continue to be popular features
- Products that cater to a younger group of seniors will increase
eventually
- The reverse mortgage market will become increasingly competitive
- Margins will continue to be tight
- A mature securitization market would simplify non-bank lender funding
- Specialist brokers are set to become a more important distribution
channel
- Refinancing reverse mortgages may become more common
- Reverse mortgage borrowers are a moving target
- Attitudes are changing but still do not favor reverse mortgages
- The usage pattern of borrowers will continue to evolve
- The key to the market is improving customer penetration
- Australian reverse mortgage advances will grow to A$1.2 billion in 2011
- In a neutral scenario, Datamonitor predicts reverse mortgage advances
to reach A$1.2 billion in 2011
- A pessimistic scenario sees lower consumer acceptance
- An optimistic scenario would entail strong growth in 2008
- New Zealand reverse mortgage advances will reach NZ$190m in 2011
- In a neutral scenario, Datamonitor predicts reverse mortgage advances
to reach NZ$190m in 2011
- In a pessimistic scenario growth will be slow for the next two years
- In an optimistic scenario competition spurs growth
- APPENDIX
- Data tables
- Definitions
- Cash rate target
- Comparison rate
- Current rate
- Home equity
- Lending commitments
- Non-bank lender
- Methodology
- Forecasting methodology
- Further reading
- Ask the analyst
- Datamonitor consulting
- Disclaimer
- List of Tables
- Table 1: Current providers of reverse mortgages in Australia, 2007
- Table 2: ABN AMRO offers a maximum LVR of 15% to 60 year old borrowers
in Australia, 2007
- Table 3: Comparison rates for different ABN AMRO interest rate
options, 2007
- Table 4: Maximum LVRs offered by ASF, 2007 (%)
- Table 5: Comparison rate table for different ASF interest rate
options, 2007
- Table 6: Bluestone offers a 45% LVR for seniors aged 85 years old, 2007
- Table 7: Comparison rates for different Bluestone products, 2007
- Table 8: CBA schedule of maximum LVRs and loan amounts, 2007
- Table 9: Comparison rate schedule for the CBA Equity Unlock Loan for
Seniors, 2007
- Table 10: Maximum LVRs offered by OFG, 2007
- Table 11: Comparison rate table for OFG reverse mortgages, 2007
- Table 12: St.George offers very conservative LVRs, 2007
- Table 13: Comparison rate schedule for two St.George reverse mortgage
products, 2007
- Table 14: Maximum LVRs offered by Bluestone NZ, 2007
- Table 15: Rate options available for different Bluestone products in
New Zealand, 2007
- Table 16: Projected maximum LVRs to be offered by Dorchester, 2007
- Table 17: Maximum LVRs offered by Savings & Loans, 2007
- Table 18: Maximum LVRs offered by Sentinel, 2007
- Table 19: Uses of reverse mortgage funds in New Zealand, July 2006
- Table 20: Forecasted population age distribution in Australia,
1996-2026
- Table 21: Reverse mortgage loan advances in Australia, 2003-07 (A$m)
- Table 22: Reverse mortgage loan advances in New Zealand, 2003-07 (NZ$m)
- Table 23: The proportion of fixed and variable rate new reverse
mortgage lending in Australia, 2004-07
- Table 24: Competitor market shares of reverse mortgage advances in
Australia, 2005-07
- Table 25: Competitor market shares of reverse mortgage advances in New
Zealand, October 2007
- Table 26: Competitor market shares of reverse mortgage advances in New
Zealand, 2005-06
- Table 27: Example of how a reverse mortgage works
- Table 28: Forecasts of Australian reverse mortgage advances, 2003-11
(A$m)
- Table 29: Forecasts of New Zealand reverse mortgage advances, 2003-11
(NZ$m)
- List of Figures
- Figure 1: A$624m was advanced on reverse mortgages in Australia in 2006
- Figure 2: In 2006, reverse mortgage lending settlements grew to NZ$96m
in New Zealand
- Figure 3: Competitor market share of new reverse mortgage advances in
Australia, October 2007
- Figure 4: Competitor market shares of new reverse mortgages in New
Zealand, October 2007
- Figure 5: Datamonitor' s neutral scenario predicts that Australian new
reverse mortgage advances will reach A$1.2 billion in 2011
- Figure 6: Datamonitor' s neutral scenario predicts that New Zealand
reverse mortgage advances will reach NZ$190m in 2011
- Figure 7: How a typical reverse mortgage works
- Figure 8: Many New Zealand borrowers use reverse mortgage funds for
living expenses, 2006
- Figure 9: In 2026, an estimated 20.7% of the Australian population
will be 65 years old or over
- Figure 10: A$624m was advanced on reverse mortgages in Australia in
2006
- Figure 11: In 2006, reverse mortgage lending settlements grew to
NZ$96m in New Zealand
- Figure 12: The proportion of fixed rate reverse mortgage lending has
increased, 2004-06
- Figure 13: Competitor market share of new reverse mortgage advances in
Australia, October 2007
- Figure 14: Competitor market shares of new reverse mortgage advances
over time, 2005-07
- Figure 15: Competitor market shares of new reverse mortgages in New
Zealand, October 2007
- Figure 16: Market shares of new reverse mortgages in New Zealand,
2005-06
- Figure 17: Datamonitor predicts Australian new reverse mortgage
advances to reach A$1.2 billion in 2011
- Figure 18: Datamonitor predicts New Zealand reverse mortgage advances
to reach NZ$190m in 2011
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