Abstract
Abstract This paper investigates the extent to which reverse mortgages can improve the economic well-being of elderly Australian homeowners. Reverse mortgages are designed to enable elderly homeowners to unlock illiquid wealth tied up in their housing equity to generate income. The elderly borrow against the value of their homes. However, no repayments are made until the house is sold or the elderly borrower dies. The findings from this paper indicate that the scope for reverse mortgages to improve economic well-being is considerable in Australia. Elderly homeowners who are likely to receive the largest gains from reverse mortgages are very elderly, single, female and have significant housing equity. However, in areas with slow house price appreciation rates elderly homeowners who enter into reverse mortgages face the risk of being left with little housing equity to draw on when needed or to bequeath to their beneficiaries when they pass away.
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