The reverse mortgage market in Australia is the most interesting segment of the country's mortgage industry. More than 5,000 reverse mortgage loans were advanced in Australia in 2004, with most being provided by St George and Commonwealth Bank, two of the 10 providers in the Australian market. Together, the pair account for more than 60% of the market. In 2004 an average amount advanced per loan in Australia stood at around A$50,000.
In New Zealand the reverse mortgage market is smaller than in Australia but is also picking up speed, Datamonitor has found. The New Zealand market now hosts three recognized providers - Sentinel, SAI Life and Lifestyle Security. Fewer than 1,000 reverse mortgage loans were advanced in 2004 and the average amount advanced per loan is now approximately NZ$45,000. Sentinel is by far the largest player accounting for around 90% of new loan volumes.
There is considerable untapped potential in the reverse mortgage market in both Australia and New Zealand if products can be made to appeal to a wider section of the population. To achieve this, providers must market their products more actively and must also attempt to change consumer perceptions.
Traditionally, reverse mortgages have been viewed as a product of last resort. They have therefore commonly been taken out when applicants have faced serious financial need and when they have lacked other financial resources. This has limited the market's growth by making reverse mortgages a negative product purchase rather than a positive one. Going forward, however, financial planners will have a part to play in establishing the product both as something to be built into financial planning decisions and also as a lifestyle tool.
In order to reach more consumers, providers need to put the product on the radar of financial planners. In so doing, they will cast reverse mortgages in a more positive light among consumers, who will be happier to talk about the product with their neighbors, friends and children. Ensuring that financial planners recognize the benefits of reverse mortgages will provide a much wider audience for the product.