Study backs reverse mortgages as retirement solution
A newly-released report commissioned by Bluestone Equity Release and written by actuarial firm Trowbridge Deloitte has boosted the case for reverse mortgage products.
Thursday, December 28th 2006, 11:47AM
by David Chaplin
According to James Hickey, Deloitte partner and author of the study, the low level of liquid retirement savings in New Zealand indicates there is a great opportunity to tap into the estimated $75 billion of housing assets to fund retirement lifestyles.
“There is an opportunity for equity release products to be more widely considered by NZ retirees in planning for their retirement,” Hickey said. “The report highlights that a considerable pool of housing wealth is not actively being utilised as an ‘asset’ to support post retirement lifestyle planning and that financial planners and advice strategies play a key part of this process.”
He said advice from financial planners would be particularly necessary to ensure retirees use the proceeds of reverse mortgage products to fund retirement income rather than spend on consumer items.
As well, Hickey said the diverse range of reverse mortgage offerings and product features made advice essential.
“The decision as to at what age to utilise housing equity, and for what purpose, is one which planners are ideally suited to advise on,” he said.
The Deloitte report identified three main uses of home equity release products: lump sum consumption; financial diversity, and; retirement support.
While the reverse mortgage industry is relatively immature in New Zealand the study said “social trends and the stigma against using equity in the house in retirement appear to be changing”.
The study pointed out that in Australia most financial planning groups are now recommending reverse mortgage products to their high net worth client base.
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