Media Release
Flat New Zealand reverse mortgage market could mean Baby Boomers miss out on a retirement opportunity
25 August 2014
Deloitte Australia’s Actuaries & Consultants released its seventh comprehensive study of the New Zealand reverse mortgage sector today.
Supported by New Zealand’s Safe Home Equity Release Plans Association (SHERPA), the study found New Zealand’s reverse
mortgage market comprised 5,300 loans, with a total book of $444 million as at 31 December 2013, compared with 6613
loans valued at $447m four years previously.
Deloitte Partner Financial Services James Hickey said: “The New Zealand reverse mortgage market is stagnant, and has
been for some time. Unfortunately, this presents a very real risk that New Zealand seniors are in danger of missing out
on the opportunity to live a more comfortable retirement, at home.”
Hickey compares using a reverse mortgage to other more traditional forms of releasing equity, such as downsizing: “While
downsizing is perhaps the obvious option to release money in the home, for many retirees it is too great an emotional
and social upheaval to just sell the family home and move to a different location. Having an option to live in their
home for longer, but being able to tap into the equity in the property via a reverse mortgage, could be much more
preferable for such retirees. Kiwi Baby Boomers need all available options if they are to secure a financially
comfortable retirement.”
Rob Dowler, Executive Director of SHERPA said: “The market size is on a par with pre-GFC levels, while the size of each
borrowing has increased the number of both borrowers and settlements is significantly down. This is largely due to fewer
lenders offering the product for sale.”
“However things are beginning to change. At SHERPA we are fielding more interest in the product from potential borrowers
and lenders. As the drag on growth caused by uncertain and pressured global business environment begins to ease, we
think the home equity release market will pick up along with the need for new business opportunities.”
James Hickey said: “Total repayments, both full and partial, this year are 14% p.a. of outstanding loans, with the
majority due to voluntary repayment and sale of property.
“This shows that a reverse mortgage is not a ‘set and forget’ product but it is actively used by its borrowers to
primarily fund the first stage of their retirement.”
The majority of borrowers in New Zealand are couples (more than half), borrowing around $10k more than their single
counterparts. And dispelling the myth that the product is only for very old retirees, many new borrowers are “younger
retirees” between the ages of 65-74.
Hickey said: “The top use for a reverse mortgages remains debt repayment, which is almost double that of the previous
year, followed by home improvement and travel. These are positive responses and show that the product can really add
value to retirees when used responsibly and supported by appropriate advice.”
Dowler added: “The North Island has the highest number of reverse mortgages at 81% with Auckland the major location
(14%). This is up by 20% since the 2010 report when the South Island had a 39% share, now down to 19%. Two thirds of the
loans - 66% - are outside the major metropolitan areas, especially in the North Island.
Deloitte thanks all industry participants who responded to the survey, acknowledging the support of SHERPA (the Safe
Home Equity Release Plans Association) in helping facilitate the survey in New Zealand.
For more information on SHERPA and SHERPA member industry participants go to http://www.sherpa.org.nz/
ENDS