Reverse mortgage uptake in New Zealand sees a boost from inflation

Inflation — far from an isolated American problem — has caused more seniors in New Zealand to tap their home equity, reinforcing international trends regarding aging in place

New Zealand-based Heartland Bank has described seeing an influx of new reverse mortgage customers due to the effects of inflation on the cost of living, according to an announcement by the bank that was obtained by RMD.

Most seniors in New Zealand are supported by the nation’s Superannuation Fund (NZ Super), which may only cover the costs of bare essentials and little else. Rising costs of food and energy have struck seniors around the world, and New Zealand is no exception especially considering the influx of reverse mortgage customers there, the bank says.

“According to credit reporting bureau Centrix, the number of mortgage holders aged 65 and over increased by 17.2% between 2017 and 2022, with nearly 1 in 5 [New Zealand] pensioners still managing a mortgage into retirement,” the bank said in its announcement. “This data mirrors the experience at Heartland over the last 15 years, where we have seen a 55% increase in the proportion of reverse mortgages being used to repay debt.”

Downsizing is also losing its luster as a potential option since aging in place has been accelerating as a preference among seniors globally, particularly since the onset of the COVID-19 pandemic, as previously reported by RMD based on data from Heartland, the European Pensions and Property Asset Release Group (EPPARG) and American Advisors Group (AAG).

The number of New Zealand retirees who carry debt beyond their careers has increased, but so has the cohort’s home equity, Heartland explains.

“[This means that] in general homeowners actually have greater equity in their homes,” the announcement reads. “With a reverse mortgage, homeowners are able to release some of the equity in their home to consolidate their debts and cover the increasing cost of living, with no need to make regular repayments or leave their home and community.”

While it might be easy for those in the United States to remain focused on the impacts of inflation stateside, a series of global challenges including ongoing supply chain issues as well as the Russian military’s invasion of Ukraine have made inflation a global concern. In some cases, this has translated into a rising interest for equity release instruments in other nations.

The trajectory of uptake for equity release products in the U.K. – sometimes referred to as “lifetime mortgages” or “retirement mortgages” in Europe – is visibly on an upswing, and it’s the hope of the industry in the U.K. and for members of EPPARG to expand what has been seen to more of the territory, according to a report from the U.K.-based Equity Release Council (ERC).

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