As the global credit crunch takes hold, growth in new sales of reverse mortgages is slowing. At an average new borrower age of 72, reverse mortgages allow the elderly to borrow against their home with deferred repayments, and is usually given in a lump sum for home improvements and living costs.
Although the amount of loans outstanding grew 34% to $2 billion in the year to 31 December 2007, new sales volumes were $466 million for 2007, 10% lower than in 2006. The slowdown happened in the last half of last year.
In the first half, new sales totalled $271 million then fell to $195 million in the second half of 2007.
Reverse mortgages require sound financial advice as there are concerns elderly citizens do not always possess the financial literacy to understand more complex debt products.
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