ISCOVER
The growing complexity of the reverse mortgage market is “bamboozling” older borrowers and increasing the risk of costly mistakes, according to new research.
The increasingly complex reverse mortgage market is creating a “minefield” for the over-60s to navigate and leaving them vulnerable to confusion and mistakes without expert help, according to reverse mortgage broking specialist Seniors First.
A new study by the brokerage found more than 150 key differences between Australia’s top four reverse mortgage lenders.
Differences include loan product features, “hidden” lender policies, and post-settlement loan procedures.
Ongoing flexibility and future access to funds also differ widely, Seniors First warned.
The mortgage brokerage cautioned that growing complexity could be “overwhelming” for borrowers and was made worse by the full list of lenders’ credit policies not being available on any website or comparison site.
“The reverse mortgage landscape in Australia is more complex than ever,” Seniors First CEO Darren Moffatt said.
“Our research uncovered over 150 variables across just four lenders. That level of complexity is overwhelming for many over-60s who are simply trying to access the equity in their homes for cash, without making a costly mistake.”
Moffatt added that retirees are often shocked to learn how much loan products and credit policies can vary depending on the lender.
“From differences in drawdown limits and interest rates, to rules around property types and age-based loan eligibility – it’s a minefield,” he said.
“For example, one lender might impose restrictions around the cash reserve feature that another doesn’t, or they might scale back the available loan amount based on property type or location.”
Seniors First also claimed that the internal processes of lenders are industry “secrets” only fully known to specialist brokers.
Reverse mortgage demand booms
More Australians are turning to reverse mortgages to ease income pressures in older age, according to brokers.
Earlier this year, Moffatt spoke to The Adviser and said growing concerns about retirement income meant the reverse mortgages market was “booming”.
“It’s very busy, and we’ve seen that it’s really picked up in the last three years,” he said, noting that he had grown his brokerage from seven staff to a team of 17 staff over the past two years in order to keep pace.
Seniors First has seen a 300 per cent rise in inquiry volume over the past two years, a trend the company attributes to cost-of-living pressures, misconceptions about how the product works, and a lack of clear, accessible information.
The brokerage noted that reverse mortgages are growing in popularity as a way for seniors to unlock the equity in their homes to cover living expenses, renovations, or help adult children.
However, many older Australians are unsure where to begin and struggle to make an effective loan comparison, Seniors First research found.
“This isn’t a one-size-fits-all loan,” Moffatt said. “Unless you’re a specialist broker, comparing reverse mortgages is almost impossible because most of the eligibility criteria is not public.
“Retirees need personalised support from people who know the ‘hidden’ rules – not a generic sales pitch. That’s where specialist brokers like Seniors First can make a real difference.”
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