In last week’s report, we talked about how younger borrowers (read: Baby Boomers) are changing the face of the reverse mortgage industry by selecting reverse mortgages in greater numbers than their elders. Today, let’s dive a little deeper into reverse mortgage borrower dynamics.
One of the first questions that arises when looking at the age distribution chart from last week’s report is whether there was any difference between genders from an age perspective. As you can see from the chart below, single males are much more highly represented in younger ages than single females, with couples even further skewed to the young side.
In many ways this makes perfect sense given the shorter life expectancy for males, which naturally leads to fewer couples (assuming these are mostly married couples) and males at older ages. There are simply more single females that survive to higher ages as potential borrowers.
What’s perhaps less intuitive is that fixed rate borrowers are skewed younger as well, clearly evidenced in the chart below.
Perhaps younger borrowers are less daunted by the full draw requirement of a fixed rate loan because they’re more likely to be using proceeds to payoff an existing forward mortgage? As we start considering how potential usage of funds impacts borrower age, it makes sense to consider payment plan types, as in the chart below.
Since Line of Credit (LoC) is the payment plan option selected by a vast majority of borrowers and is currently mandatory on Fixed HECMs due to full draw requirements, we’ve narrowed our focus to just the HECM ARM population and chopped off the top 60% of the chart to see the change more clearly.
Under 8% of HECM ARM borrowers in their 60s select one of the four monthly payment options (excluding LoC), whereas 32% of those over 100 select a monthly payment option. Given the greater tenure payments available to older borrowers this would seem more attractive to older borrowers, but the level of change surprised us.
So what does all this mean? We suspect that many will see product development opportunities and others likely see sales and marketing implications. We’re as interested as everyone else to see what this means for our market, but the resounding bottom line remains that the reverse mortgage market is in great need of market segmentation and diversity in our approaches to growing the business.
We’d love to hear your thoughts in the comments below, or use our contact form to email us privately.