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Equity release products, better known as 'reverse mortgages', are not new. They were developed in the United Kingdom in the 1920s and made their way to the United States in the 1960s. Even Australia has tried them when the Advance Bank trialed the product in 1996, but withdrew it soon afterwards as a result of consumers' lack of familiarity with the concept. Unlike conventional mortgage products, reverse mortgages focus exclusively on a specific segment of the population: retirees. They allow retiring homeowners to access a largely untapped asset to fund a standard of living that for many would otherwise be out of reach. And it seems their reintroduction to the Australian market is timely. Figures released by the Australian Bureau of Statistics show the average man can now expect to live until 77 and the average woman until 82. Men and women born in the 1920s could expect to live to the age of 59 and 63 respectively, meaning that with every decade that passes, life expectancy grows by an average of four years. These trends mean that the proportion of the population who are aged 65 years and over will roughly double over the next 40 years, to almost one in every four Australians by 2042. Australians retiring in their 50s and 60s can now expect to spend two to three decades in retirement. At the same time, there will be almost zero growth in the number of Australians of workforce age. As a result, the elderly dependency ratio — people aged 65 years or more to the working age (15-64 years) population — is projected to increase from 18 per cent in 2000 to more than 37 per cent in 2050. Retirees have generally had to depend upon government pensions to either fund their retirement or supplement their income from personal superannuation plans and savings. However, the majority of retirees also own a significant asset - their homes. A report into funding the retirement of the baby-boomers, states that the average 50-64 year old has accumulated $240,000 of assets: about two-thirds higher than the national average. Go to page: 1 2 3 4 5 6
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