One of the most evident trends in financial services is the growing demand for reverse mortgages.
HomEquity Bank confirmed that trend (again) by posting a 42% year-over-year surge in Q4 reverse mortgage volume.
President and CEO Steven Ranson commented: “…The (seniors demographic) wave is here…tremendous market demand is fuelling our strong growth in originations.”
Greg Bandler, Senior Vice President, Sales & Marketing, adds that mortgage brokers had a big hand in these results. He tells us that fourth-quarter volume from HomEquity Bank’s broker channel rocketed 56%.
CHIP’s Free Closing Costs campaign was also key. It saved seniors $1,495 in set-up costs, which is no small sum to someone on a modest income. That promo ended December 31 but HomEquity is still waiving setup costs on 5-year terms (which come with a rate of 5.95% currently).
“We’ve seen momentum building all year and these results represent a confluence of consumer motivation, fee promotion, as well as continued low interest levels,” Bandler said.
HOMEQ’s stock rose 8% this week.
Rob McLister, CMT
As a side note: CHIP’s rates are starting to look high against a backdrop of 2.99% four- and five-year conventional mortgage rates.
Hopefully they come down a few notches for consumers’ sake. It seems like it’s been a while since HomEquity’s last meaningful rate decrease.
We call theses equity release schemes in the UK. Thery have become popular over the past few years with people approaching retirement. many peoples pensins have not met their target and are falling short of their requirements. Seems like a good option.
Hi Rob,
Just curious to know how much the increased prevalence of reverse mortgages is correlated to the decrease in the age requirement to 55?
Hi Appraiser,
It didn’t come up in comments from HomEquity but it had to have some degree of impact. Then again, loan-to-values are more restricted for 55-60-year-olds and folks have more alternatives at that age.
Whatever the case, it would be interesting to know the additional uptake attributed to the lower age guideline, so we’ll have to inquire.
Cheers…
Why dont these seniors shop around? There are a few lenders that dont ask for income and you can refi up to 65% LTV at competive rates? Why are they flocking to this CHIP product at such terrible rates and fees? Anyone?
My guess is that the option not to have any payments on a reverse mortgage is attractive to many.
Also you can choose to pay all or some of the monthly interest on a reverse mortgage, which is beneficial if you wish to maintain / mitigate your loss of equity over time.
cj,
Which lenders don’t ask for income?
Don’t applicants still have to declare a specific income?
“cj”
Would you give money to someone without:
> Any proof of income
> Any assurance they could pay their debts
> Any knowledge of their credit quality
If so, what rate would you charge?
What if this person did not make a single payment to you for 10 years and there was no way you could get your money back sooner? What would you charge then?
Think about it.
Credit lines and mortgages are not suitable for most seniors considering a reverse mortgage. They require:
> Monthly payments
> Good credit
> Good debt service ratios
> Sufficient income (even if you state it)
In addition, credit lines:
> Have rates that can change any time.
> Have credit limits that can change any time.
> Can be called in by the lender for technically any reason, such as ongoing lack of principal payments, late payments or death of a spouse
If a line of credit gets called and a senior citizen’s loan amount is too high for their qualifications, they could be left without a refinancing option and lose their house.
It is my view that credit lines are totally unsuitable for seniors with minimal cash flow and few liquid assets. This is why reverse mortgages exist.
this is the same trend as in the US – many lenders have increased more than 45% last year – originations yoy
not sure how many lenders are excited about lending to 80 year olds (or 90 year olds) on a credit line even if that was a 30% loan to value advance, and even potentially with some pension income available. Kicking out an elderly person for non payment (or exercising power of sale) on a $100,000 mtge on a $400,000 home is not real exciting for a lender as a potential (and perhaps even really likely)end to this type of the loan. As a broker it is simply great when we have access to a large array of products that can meet the special needs of our varied clients
At 5.95% compounded, this secured equity loan would double in size every 12 years. Is anyone today expecting their home to double in value over the next 12 years? not me!
This type of loan only deserves consideration as a very, very last resort!
Because of the weak economy, the trend in the US is the same. Reverse mortgage popularity continues to grow.
This is not necessarily a bad thing…because part of the process in the US is a mandatory counseling session where the borrower meets with a impartial credit counselor to help them honestly determine whether or not the loan try makes sense.
For example, if you are looking into the reverse mortgage so that you can do improvements to your house to improve it’s energy efficiency, there are other programs available that the borrower may be unaware of that will accomplish the same purpose that will be FAR cheaper in terms of the closing costs.
I don’t know if this counseling session is mandatory in other countries…but it should be.