Deloittes’ Study Confirms Sentinel’s Experience
26 April 2007
Deloittes’ Independent Study Confirms Sentinel’s Experience
The first comprehensive study of New Zealand’s home equity release market – the Trowbridge Deloitte New Zealand Reverse Mortgage study, which found significant growth and acceptance of this financial solution – confirms leading New Zealand provider Sentinel’s experience.
“The market has grown strongly for us in the past year, and is expected to grow even more by overall size and in the size of our loan book in years to come,” says CEO of Sentinel Vaughan Underwood. “Home equity release is clearly being seen as a major financial solution for seniors and we believe it will be even more frequently utilised by baby boomers. The findings tally closely with Sentinel’s experience and demonstrate that this new financial solution is filling a gap in retirement funding, and genuinely helping older New Zealanders out.”
Sentinel, which is three years old and is the leading provider of home equity release in New Zealand, experienced a nearly 100% increase in its loan book in 2006 over 2005 – from $89 million (at the end of 2005) to $176 million (at the end of 2006).
This represented a growth of 94% in numbers of loans – from 1801 loans at the end of 2005 to 3493 loans at the end of 2006.
The above figures were released in January by Sentinel, and closely mirror the Deloitte report today.
“Of interest – the Deloitte’s survey says that loans are predominantly used for home improvements,” said Mr Underwood. “Independence and being able to live in your own home during senior years, are being fostered by the Government in their “Ageing in Place” strategy. Indeed, most elderly people prefer to spend their senior years at home. But independence can come at the expense of continued home maintenance, which many can ill afford – and this research reiterates that. Sentinel’s own research shows that after retirement most New Zealand homes are only painted once every twenty years - simply not enough to maintain their condition or value. A home equity release such as Sentinel’s Lifetime Loan can be a genuine life saver, and a great boost to continued independence. By releasing equity in their major asset – their house – many seniors find they can maintain their home properly, and make it more comfortable to continue to live in.”
Sentinel Limited is a New Zealand owned and established company that was one of the first to offer home equity release products here.
It is a member of New Zealand’s voluntary industry association SHERPA (www.sherpa.org.nz) [Safe Home Equity Release Plans Association] which has a code of practice aligned with European consumer protection models to help ensure customers are well informed on home equity release.
Lifetime Loans – background
Sentinel’s Lifetime Loans are secured against a customer’s house and do not require any regular repayments to be made. The amount able to be borrowed increases with the customer’s age, rising to 45% of the home’s value at age 90. Interest is applied to the loan and accumulates monthly. The full value of the loan may be repaid at any time, and is repayable on sale or at the end of the person’s life.
On average most borrowers take out less than 15% of the value of their homes.
All Sentinel lifetime loan clients are given a projection of the loan’s size based upon the value of their homes, the amount they are borrowing, and the projected value of their home in 20 years – on a conservative projection basis of increase in value of their home annually of 4% and 7%.