Australia is a significant part of the global equity release trend

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Home equity can play an important role in retirement funding.

The growing attraction of equity release for retirees in Australia is part of a global trend, according to the recent Global Equity Release Roundtable 2020 survey.

The 2020 survey, published by the European Pensions and Property Asset Release Group, predicts that the global Equity Release market will treble in the next decade to more than $US50 billion, a finding based on analysis of 13 countries from Europe, the US and Australia.

Fractional investment platform group DomaCom (ASX: DCL) Head of Marketing, Warren Gibson, says this survey highlights just how important equity release is becoming for asset rich and cash poor retirees, in Australia and globally.

“It’s the opportunity to use home equity to advantage rather than have it just sit there ‘unemployed’, allowing retirees to strengthen their personal balance sheets by moving some financial resources tied up in their home to their super or another savings or income producing vehicle.”

Key findings from the survey include:

  • Between the countries analysed, more than US$15 billion was released in 2020.
  • By 2031, the market is expected to exceed US$50 billion;
  • The most common sources of financing for equity release mortgages are banks and insurance companies, as well as securitisations;
  • The most common type of equity release is the lifetime mortgage, followed by home reversion schemes.
  • Equity release products are typically available to customers from the age of 55 or 60 years old, with a mix of fixed and variable rates; and
  • A lack of customer awareness is cited as the main barrier to growth, followed by insufficient funding, notably in European markets.

Equity Release Industry Council of Australia CEO Kevin Conlon concurs with the last point. “The challenge of funding a dignified retirement is a global issue and the solution offered through equity release is often not well understood by those who would benefit most from accessing their housing wealth in this way.”

In Australia, there are four market options for equity release: reverse mortgages, the Federal Government’s Pensions Loan Scheme, a home reversion scheme and a fractional senior equity release product.

Gibson says: “Based on the findings of this global survey, there is likely to be an increased appetite for all forms of equity release in the future.

“Where our senior equity release product differs is that it’s a financial product registered with ASIC that allows homeowners to release equity under the downsizing provisions and stay in their home.

“As a financial product it requires seniors to get advice and, given the complexity of the downsizing rules and the variability of personal situations when it comes to equity release, we believe this is a decided advantage to ensure retirees make the best choice.”

“It also increases advisers business reach and enhances their role as a  professional financial adviser”.

Read the survey report.

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