Researchers highlight debt, equity and inheritance sensitivities
Reverse mortgages remain a niche product in New Zealand – but new research suggests they’re playing an increasingly important role in helping older single women manage cash flow in retirement.
With one in five New Zealanders expected to be over 70 by 2066, and most wanting to “age in place” rather than move, interest in using home equity to fund later life is steadily coming into sharper focus.
Lincoln University’s Professor Graham Squires (pictured) has examined how reverse mortgages are being used in New Zealand, and says the timing is significant, RNZ reported.
“This research has not been conducted in New Zealand before, and it is timely given the trajectory of our ageing population and the financial pressures retirees face,” Squires said.
The findings come as RBNZ’s recent easing cycle has taken the OCR down to 2.25%, part of 300 basis points of cuts since August 2024 aimed at supporting a fragile recovery and guiding inflation back toward the 2% midpoint – a backdrop that eases mortgage servicing for some households but still leaves many retirees contending with higher living costs.
Niche products, but potential for growth
Squires noted that reverse mortgages are currently offered only by Heartland Bank and Southland Building Society, but sees scope for them to become more common.
“Reverse mortgages can be useful, but they come with sensitivities around debt and intergenerational wealth,” he said. “If someone remortgages their house later in life, this can affect the level of debt a person holds, potentially passing it on to their children.
"Our research aimed to provide an objective understanding of how these loans are actually used.”
Squires said the average amount borrowed was just under $50,000 and 95% were voluntarily repaid before the borrower died. The typical applicant was a 72‑year‑old single woman.
He added that New Zealanders appeared more cautious than Australians, who often borrowed up to the maximum permitted amount.
“Here in New Zealand, the market is highly regulated to help protect financially vulnerable people – those who are struggling financially and repayments may be difficult to make," Squires said.
"I believe this research shows that New Zealanders are sensible by not taking out large loans in their retirement years, and that appropriate safeguards are in place. What is vital in the future is the need for people to be financially literate, so they understand what financial options are available to them and what the most appropriate might be.”
Single women feel the hit of a “single” pension
The research found that many reverse‑mortgage borrowers are single females, which aligns with what other retirement‑income providers are seeing.
Ralph Stewart, whose business Lifetime Retirement Income offers Lifetime Home – a model that allows people to sell a stake in their house in return for ongoing income – said his clients were also commonly single females.
“They're sort of left alone in the household by themselves with the house with maybe 20 years to run," Stewart told RNZ.
People who were widowed or separated would find their pension dropped from the married rate of $828 a fortnight each to the single rate of $1076.
“The amount of discount to NZ Super is not proportionate to your expenses,” Stewart said.
Banking expert Claire Matthews from Massey University agreed that being widowed can be a catalyst for looking at other options.
“It would make it more challenging to remain in the family home," Matthews said. "But that should also affect widowed men, although the gender difference would reflect the higher rate of women being widowed.
"However, I wonder to what extent it also reflects the known gender gap in retirement savings – if women have lower levels of savings, they may have a greater need to access the equity in their home.”
Kiwis conservative – “perhaps too conservative” – on reverse mortgages
Retirement adviser Liz Koh, founder of Enrich Retirement, said New Zealanders’ attitude to reverse mortgages remains very cautious.
“Perhaps too conservative. Current retirees are part of a generation who believe that it is not good to take on debt, especially in retirement," Koh said.
“This is despite the fact that the debt does not have to be repaid during their lifetime. It would be interesting to know the reasons why the mortgages are voluntarily repaid before death. Possible reasons include selling the home to move into a retirement village – where reverse mortgages are not permitted or family members repaying the debt to avoid erosion of their inheritance.
She believes many retirees could afford to be more relaxed about using reverse mortgages and make better use of them to improve their standard of living, noting that there is a balance to be struck between spending one’s own wealth in retirement and preserving more for family members to inherit.
“My observation is it is mostly people who have separated or divorced," Koh told RNZ. "Women usually end up worse off than men after a relationship breakdown – probably due to lower earning power and also psychological issues.”
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