"Life needs, lifestyle and smart money"- these are the main reasons why older homeowners apply for reverse mortgages, according to research released this month by the Australian Housing and Urban Research Institute (AHURI).
AHURI has published its findings in a report titled Reverse mortgages and older people: growth factors and implications for retirement decisions, which looks at the subject from the dual viewpoints of consumer and broker.
`Life needs' are those relating to everyday necessities (food, lodging, transport, health care); `lifestyle' expenditure is more optional and tending to be `once-off' in nature, such as needing a holiday, debt consolidation or additional health care. `Smart money' refers to expenditure for more strategic purposes such as further investment or the advance transmission of inheritance in return for care and assistance.
The report investigates the effects of the GFC, the increasing number of `Baby Boomers' reaching retirement and the changing attitudes of both mortgage holders and their families, but found that, basically, nothing has changed over the years in terms of product awareness.
"While is clear that there are many very satisfied holders of reverse mortgage products, the nature of the product and of the client group presents a number of risks", report authors write.
"The biggest issue at the moment is one of the imbalances of information and hence power between the buyers and sellers of reverse mortgage products.
"Regulation directions could involve those that reduce risks for older consumers by ensuring suitability of the match between the available product choices and consumer need with the most vulnerable in mind."
The report proposes a number of education strategies to improve the awareness of consumers about the nature of the products and suggests that ongoing monitoring be implemented to evaluate the impact of any new measures.
It is available for download from the AHURI website.