Ageing Aussies may lead to more reverse mortgages

Older borrowers can retain their homes whilst getting equity, according to a bank.

Australia’s ageing population may lead to the rise of reverse mortgages, according to S&P Global Ratings.

A reverse mortgage functions similar to a home loan. Unlike a home loan, no regular repayments are needed, and the loan is repaid from the future sale of the property, according to one definition by Heartland Bank Australia, a Melbourne-based bank that offers this type of loan.

The arrangement allows older borrowers to retain their homes whilst getting equity for various purposes.

In its website, Heartland Bank reports that over 27,500 Australians have opted to take out a reverse mortgage from their bank alone.

Prolonged periods of rising property prices meant that many older households have built up considerable equity in their homes, according to S&P.

“Reverse mortgages enable retirees to unlock this equity, enabling people to stay in their homes longer and access additional financing in their retirement,” S&P said in its 2025 Structure Finance report on Australia and New Zealand, where it stated that an ageing population could “lead to more reverse mortgages.”

However, the different paths of interest rates and home price appreciation can lead to varying rates of home equity erosion, posing risks to both the lender and borrower, S&P said.