Aging Populations Could Drive Demand For Reverse Mortgages
For at least four decades, many countries have seen an upward drift in the percentage of their populations that are aged over 60 years and are nearing or in retirement. If the trend continues, demand for reverse mortgages could increase in the future, particularly because many seniors are asset rich and cash poor.
With reverse mortgages, 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 Global Ratings has established criteria for rating new transactions of reverse mortgages in the U.K., and we would likely borrow these to rate similar deals in other countries. This would involve a consideration of regional variation in housing finance and regulations along with key risks, some of which are contemplated in this article.
U.S. medians as of 2022. Europe medians from 2019-2021. Sources: U.S. Federal Reserve, European Union Household Finance and Consumption Survey, S&P Global Ratings.
