KEY POINTS:
Around 13 per cent of people who take out reverse mortgages do so to repay other debt.
This is one of the findings of a study into the reverse mortgage market commissioned by Sherpa, the industry body representing home equity release product providers in this country.
The paper, written by actuarial practice Trowbridge Deloitte, found the most popular use for equity release was to fund home improvements - with 28 per cent of people taking out reverse mortgages for this reason.
Repaying debt, such as clearing mortgages as people head into retirement, was the second most popular reason.
The study also found that most people repay reverse mortgages long before they die. More than three-quarters of all reverse mortgage holders paid their loans off voluntarily - for example, by selling the property. Only around one in in five discharges were due to mandatory reasons, such as death or moving into aged-care facilities.
The reverse mortgage market at December 2007 consisted of more than 6500 loans worth $365 million, 64 per cent bigger than at the same time the previous year, the study said.
This week reverse mortgage market leader Sentinel said it was reviewing its funding arrangements and laying off 10 staff, as rising interest rates and lower property prices undermined demand.
But it said market penetration in New Zealand was still low, with less than 2 per cent of over 65-year-olds who own their own home having used a home equity release product.
