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Reverse mortgage company Sentinel doubled its loan book in 2006 to $176 million, and expects a further significant increase this year as retirees seek funds for their retirement.
Three-year-old Sentinel has 90 per cent of the home equity release market, or 3493 loans as at December 31, and said a further 3000 senior citizens were likely to apply for an equity release loan this year.
The Government is reviewing regulations for providers of reverse mortgages, which are popular due to the importance of property to retirees' wealth. The loans can be complex and have an impact on older people's financial positions as they age.
The average lump sum borrowed represented about 13 per cent of the property's value, and was typically used to maintain or improve the home, pay off debt, buy a car, or travel, Sentinel managing director Richard Coon said.
"The Government's timing on consultation for the sector to ensure consumers are well protected is right on the mark, given this burgeoning financial tool," Mr Coon said.
The average initial loan drawdown fell 3 per cent to $39,708, after Sentinel cut the minimum loan size to $10,000, from $20,000 in response to customers.
The average age of borrowers fell a year to 72 years.
The amount that can be borrowed increased with age.
The highest average property values borrowed against in 2006 were in Rodney ($538,200), and the lowest were on the South Island's West Coast ($202,364).
The area with the highest average initial drawdown was the Far North with $70,197.
- NZPA
