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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

‘The equity release opportunity in New Zealand - 2007 and beyond’ report found that most 65-year old New Zealanders today retire with an average of only $60,000 in liquid assets but have more than three times that amount tied up in property.

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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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 ▼2.29 ▼2.59 ▼2.65
ANZ 4.44 2.89 3.25 3.39
ANZ Special - 2.29 2.69 2.79
ASB Bank 4.45 2.29 2.59 2.65
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - 2.29 2.59 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 2.89 3.19 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland Bank - Online 2.50 1.99 2.35 2.45
Heretaunga Building Society 4.99 3.50 3.40 -
HSBC Premier 4.49 2.25 2.35 2.65
HSBC Premier LVR > 80% - - - -
HSBC Special - 1.99 - -
Lender Flt 1yr 2yr 3yr
ICBC 3.69 2.25 2.35 2.65
Kainga Ora 4.43 2.79 3.04 3.13
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.20 3.50 3.50
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.35 2.65 2.65
Liberty 5.69 - - -
Nelson Building Society 4.95 3.20 3.24 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
SBS Bank 4.54 2.79 2.79 3.15
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 2.29 2.29 2.65
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - 2.09 - -
The Co-operative Bank - Owner Occ 4.40 2.29 2.59 2.79
The Co-operative Bank - Standard 4.40 2.79 3.09 3.29
TSB Bank 5.34 3.09 3.29 3.45
TSB Special 4.54 2.29 2.49 2.65
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 3.09 3.29 3.39
Westpac - Offset 4.59 - - -
Westpac Special - 2.29 2.69 2.79
Median 4.55 2.79 2.99 2.80

Last updated: 4 March 2021 8:47am

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