Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


NZ mortgage market could mean Baby Boomers miss out

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

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Half Empty: Fonterra's 2017 Opening Forecast Below Expectations

Fonterra Cooperative Group raised its forecast farmgate milk payout for next season by less than expected as the world's largest dairy exporter predicts lower prices will crimp production and supply will pick up. The New Zealand dollar fell. More>>

ALSO:

Pest Control: Mouse Blitz Team Leaves For Antipodes

The Million Dollar Mouse project to rid Antipodes Island of mice is underway with the departure of a rodent eradication team to the remote nature reserve and World Heritage Area. More>>

Gongs Got: Canon Media Awards & NZ Radio Awards Happen

Radio NZ: RNZ website The Wireless, which is co-funded by NZ On Air, was named best website, while Toby Manhire and Toby Morris won the best opinion general writing section for their weekly column on rnz.co.nz and Tess McClure won the best junior feature writer section. More>>

ALSO:

Pre-Budget: Debt Focus Risks Losing Opportunity To Stoke Economy

The Treasury is likely to upgrade its forecasts for economic growth in Budget 2016 next week but Finance Minister Bill English has already signalled that more of his focus is on debt repayment than on fiscal stimulus or tax cuts... More>>

ALSO:

Fulton Hogan's Heroes: Managing Director Nick Miller Resigns

Fulton Hogan managing director Nick Miller will leave the privately owned construction company after seven years in charge. The Dunedin-based company has kicked off a search for a replacement, and Miller will stay on at the helm until March next year, or until a successor has been appointed and a transition period completed. More>>

ALSO:

Gordon Campbell: On Electricity, Executions, And Bob Dylan

The Electricity Authority has unveiled the final version of its pricing plan for electricity transmission. This will change the way transmission prices (which comprise about 10% of the average power bill) are computed, and will add hundreds of dollars a year to power bills for many ordinary consumers. More>>

ALSO:

Half Empty: Fonterra NZ, Australia Milk Collection Drops In Season

Fonterra Cooperative Group says milk collection is down in New Zealand and Australia, its two largest markets, in the first 11 months of the season during a period of weak dairy prices. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news