Reverse Mortgage Lenders

Reverse mortgage lenders of days gone by

Historically, the banks were the major players in the reverse mortgage lenders market. In 2019, the following institutions had the largest market share of the reverse mortgage lenders[1]: CBA Reverse Mortgage, Macquarie Bank Reverse Mortgage, Westpac Reverse Mortgage and Heartland Australia. Today, reverse mortgages are provided by Household Capital, Heartland and a few smaller lenders. 

While some of the major banks may still have reverse mortgage clients on their books, the last of them ceased offering the product in early 2019. This was CBA, which was previously active in the reverse mortgage industry through its own brand as well as its subsidiary Bankwest. CBA purchased Bankwest in 2008 and continued to offer reverse mortgages through the brand. CBA had been the major operator in the industry; however, on 1 January 2019, CBA and Bankwest removed reverse mortgages from their product range.

For many, that the big banks exited the reverse mortgage market was not seen as a negative for the sector. Traditional bank reverse mortgages were not always aligned with the long-term housing and income needs of Australian retirees and often failed to provide genuine retirement funding adequacy and certainty. This stemmed from several reasons, notably a focus on the short term consumption of home equity and a sales culture that targeted the neediest clients, so reverse mortgage funding became an option of ‘last resort’ rather than part of a long term retirement funding plan.

Reverse mortgage providers: The current market environment

Although the big banks continue to service reverse mortgage clients, the products are no longer offered. According to IBIS World, the number of operators in the industry has declined over the past five years, as firms have either exited or stopped providing new loans. In 2020, the three banks maintained market share[2], although no longer offering products. However, the total size of the sector grew, with new entrants such as Household Capital increasing its share of the reverse mortgage provider market.

You can find out exactly what is a reverse mortgage by downloading our free guide. The future for reverse mortgage products is bright. With a greater focus on using home equity to provide housing and funding adequacy for the expected twenty-five plus years of retirement, a concept backed by the Australian government through its Retirement Income Review, older Australians can look forward with confidence to many active and happy years ahead.

Reverse mortgage interest rates are usually higher than those offered on new mortgages, primarily because they are generally repaid at the end of the loan rather than via regular repayments during the term of the loan.

As a result, the interest compounds (or adds up) over time.

Using a reverse mortgage enables you to increase your retirement funding because you don’t have to make regular repayments (although most providers allow you to do so if you wish).

That’s why finding a low interest rate is important…a lower rate means there is less interest compounding over time, which ultimately results in you owing less at the end of the loan and therefore retaining a greater proportion of equity in your home.

Reverse Mortgage Lender Comparison

This is why Household Capital consistently offers a consistently low rate in comparison to the major reverse mortgage providers in Australia.

In the same way that people compare banks before taking out a home mortgage, a personal loan or a credit card, you should compare the rates available from the different reverse mortgage lenders.

[1] IBIS World Industry Report OD4206

[2] IBIS World Industry Report