Reverse mortgages have been available in Australia since the early 1990’s. The Advance Bank was the first lender to offer a true reverse mortgage loan (as opposed to a line of credit), but the product was only mildly popular due to limited demographic demand of the times.
When St George Bank took over Advance bank in 1998 it inherited their reverse mortgage product and this has since developed into the Senior’s Access Home Loan they continue to offer today. Around 2001 the Commonwealth Bank entered the reverse mortgage market with the release of what is now known as ‘Equity Unlock For Seniors’.
From 2002 there was a period of steep growth in the Australian reverse mortgage market. In 2004 the early product providers established ‘The Senior Australians Equity Release Association of Lenders’ (SEQUAL), as an industry body to represent their interests. SEQUAL established a code of conduct and an infrastructure of self-regulation which was very effective in protecting sometimes vulnerable pensioners and elderly borrowers.
Over the next few years a stream of new lenders emerged in anticipation of the retirement funding shortfall projected for the coming generation of retiring baby boomers.
By 2006 there were more than twenty banks, credit unions and non-bank lenders offering reverse mortgages including Macquarie, Bankwest, ABN Amro, Bluestone, Australian Senior’s Finance (ASF) and Over Fifty Group.
(This dizzying array of product choice had a ‘bewildering’ effect on pensioners, creating a demand for specialist reverse mortgage brokers who understand the needs of senior consumers.
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It was during this period that brokers accounted for 50 per cent of all reverse mortgages originated in Australia, and that Seniors First grew to attain almost 5 per cent of that market share).
By 2008 some 40,000 Australian pensioners and self-funded retirees had taken a reverse mortgage, double from 20,000 just three years earlier.
Further exponential growth was predicted when the global financial crisis (GFC) struck, seizing up the capital markets that non-bank lenders in particular relied upon for funding.
Although no lenders went broker or collapsed, the GFC funding crisis was unsustainable for all but the largest of the domestic banks, and fifteen reverse mortgage lenders closed or stopped offering new reverse mortgages between 2008 and 2010. At the low point of the cycle, just four banks remained as viable reverse mortgage options to Australian seniors.
In 2011, the Federal Government under then minister Bill Shorten, officially regulated reverse mortgages as part of the ‘second phase’ of the National Consumer Credit Protection (NCCP) code. This law improved disclosure requirements by lenders and brokers, and enshrined in legislation key components of SEQUAL code of conduct such as the ‘No Negative Equity Guarantee.’
By 2014 the reverse mortgage market had begun to show signs of growth once again. Several lenders re-emerged to be active with new lending, and there are rumours other lenders will soon offer exciting new reverse mortgage loans for pensioners and retirees. In anticipation of this, Seniors First Australia’s leading reverse mortgage broker has re-launched.