Reverse mortgages have been made easier to get by Heartland Bank, with the bank raising the LVRs on such loans by 5%.
Heartland Bank is the largest player in the Home Equity Release market.
The company's general manager for retail and reverse mortgages Andrew Ford says this is the first time LVR limits have been increased since 2004.
He says the change will enable some people to get reverse mortgages who were previously unable to get one, and should help people to have a better life in their retirement.
“If the car breaks down or people want to go on a holiday or they need a hip replacement, then (the money) is there for them to use.”
He says LVRs are all based on age and the limits will go up proportionately.
“For instance, with a 70 year old, we used to lend them a maximum of 25% of a home, and now we will lend up to 30%
“An 80 year old can borrow, 40% and the maximum is 50% to a 90 year old.”
These moves come as reverse mortgages become more popular generally.
Official figures from the Reserve Bank show the total value of reverse mortgages has grown in the past two years from $620 million to $718 million.
And while it is just 0.14% of total bank lending, that growth rate is 16% in just two years.
At Heartland Bank, the rise has been even more marked.
“In the four months ended October 31, we have had a 70% increase in new business compared with the same time last year,” Ford said.
“So we have seen a big increase in the number of older people wanting to access some equity in their home so they can live a more comfortable retirement.”
There has been some speculation that the recent big rises in house prices have given people more headroom to take out a reverse mortgage without severely depleting the equity left over to bequeath to their kids.
Ford says this has played a big part in the trend. However another player, SBS Bank, says it is only one factor in the growth of reverse mortgages. Also important is the fact that people are simply becoming more aware of them.