Even though reverse mortgage volumes are starting level off in the US, they continue to grow in other parts of the world experiencing aging populations. The governments of Australia, India and Taiwan have either been offering reverse mortgages or are beginning to examine offering the product. Below are a few examples of the growth potential in the Asia Pacific market for not only reverse mortgage but products and services to help seniors in these areas age in place.
Despite reverse mortgages not taking off it India, banks recently improved the product by allowing homeowners to receive regular monthly payments until death. Prior to the change, there was a 20-year cap on payments from the time of entering into the arrangement with the lender. According to the Financial Chronicle, the National Housing Bank (NHB) worked with Star Union Dai-chi Life Insurance Company (SUD Insurance) to provide the life-long annuity facility
“There were several representations on behalf of senior citizens that the 20-year cap on payment on annuities was unjust since the requirement of money is more when they grow older. The new scheme not only allows for annuity payment till death but also because it is an arrangement with an insurer the monthly payment would be higher than the earlier scheme,” said NHB chairman and managing director S Sridhar.
Borrowers are able to receive a higher payout because insurers are using mortality charts to determine the payout where as banks previously calculated the payment amount through discounting the property value at a specified rate said Sridhar.
While growth of the reverse mortgage industry in Australia slowed compared to previous years, the marketplace still saw an increase of 13 percent according to a study commissioned by the Senior Australians Equity Release Association of Lenders. Conducted by Deloitte Actuaries and Consultants, the study shows there were 38,048 loans on issue at the end of the June, with a total outstanding value of $2.61billion, up from $2.48bn at the end of December last year. Since June 2006, the market has grown from about $1bn, but still only represents about 1-2 per cent of all the senior Australian households in Australia.
Like here in the US, when reverse mortgages were introduced many were concerned that seniors might not understand what they were getting into said Kevin Conlon, Chief Executive of SEQUAL. Findings from the survey suggest that retirees are using them appropriately, and responding wisely to the economic climate through equity release.
"Senior Australians are continuing to show restraint when releasing equity through reverse mortgages, shown by borrowers, on average, only choosing to access about 70 per cent of the actual funding available to them," he said.
Taiwan is considering offering a government plan to aid seniors by allowing them to convert their home equity into cash after the chairwoman of the Bank of Taiwant (BOT) offered tentative support said the China Post. Sean Chen, chairman of the Cabinet-level Financial Supervisory Commission (FSC), said that the FSC will push for a governmental reverse mortgage mechanism to cushion the nation’s growing elderly population. According to the article, the FSC has been considering reverse mortgages for years but determined that such a program was not viable for banks to administer alone. A new reverse mortgage program will require cooperation of various government departments to work. BOT Chairwoman Susan Chang, said that banks in Taiwan will support the government’s plan if proven “viable”. Taiwanese banks will advise the government on the reverse mortgage plan if requested, Chang said.