01 December 2025 New Zealand research reveals surprising trends in reverse mortgage use

As New Zealand’s population ages, the financial landscape for retirees is undergoing a significant shift. For homeowners aged 55 and over, one option that remains under the radar is the reverse mortgage—a loan that allows people to access the equity in their homes without selling. 

While the baby boomer generation has largely benefited from decades of property appreciation, younger generations may not enjoy the same financial security in retirement, entering the housing market later and missing out on those gains.

To better understand this niche financial product, international researchers, including Professor Graham Squires from Te Whare Wānaka o Aoraki Lincoln University, analysed reverse mortgage data from one of New Zealand’s major providers from 2004 to 2021. The study’s findings were published in the article The reverse mortgage market in New Zealand: key drivers of loan determination in Applied Economics. The research explored how these loans are used, the characteristics of borrowers and the factors that influence eligibility, with these insights particularly relevant amid a cost-of-living crisis and growing concerns about retirement affordability.

“This research has not been conducted in New Zealand before, and it is timely given the trajectory of our ageing population and the financial pressures retirees face,” says Professor Squires. “While the baby boomer generation has accumulated wealth through property, younger generations are facing greater challenges entering the housing market. As a result, this may see them relying more on pensions and other financial tools to support them in retirement.”

Currently, reverse mortgages remain a niche offering, with only Heartland Bank and Southland Building Society offering them. However, in the future, Professor Squires predicts people will seek more alternative financial instruments, with reverse mortgages a part of this wider picture, as a way for retirees to unlock home equity without downsizing.

“Reverse mortgages can be useful, but they come with sensitivities around debt and intergenerational wealth,” explains Professor Squires. “If someone remortgages their house later in life, this can affect the level of debt a person holds, potentially passing it on to their children. Our research aimed to provide an objective understanding of how these loans are actually used.”

Despite the perception that reverse mortgages involve large sums, the average loan amount is just $49,267. This figure represents, on average, less than seven percent of the property’s value, which is significantly lower than the maximum permitted by banks (35.34%). These findings suggest that borrowers are using reverse mortgages conservatively, possibly as a short-term financial solution. This is further supported by the fact 95 percent of loans were voluntarily repaid before the borrower’s death, and most were settled within an average of six years. 

The study also uncovered that the typical applicant is a 72-year-old single woman and older applicants aged 75 and over tend to borrow less than younger retirees aged 55 to 74. This may reflect their caution in their limited ability to repay the debt. Additionally, the research confirmed that the home's market value is the strongest predictor of the loan principal and factors such as interest rates have a greater influence than personal characteristics, such as age or marital status.

Interestingly, the analysis found that looser loan-to-value limits do not lead to people borrowing higher amounts, challenging the assumption that more generous lending criteria would encourage larger loans. Instead, borrowers appear to remain conservative, understanding the need to repay the debt. 

Overall, New Zealanders appear more cautious than Australians, who often borrow up to the maximum permitted amount. This prudence, combined with strict regulation, helps protect financially vulnerable borrowers, as Professor Squires explains.

“Here in New Zealand, the market is highly regulated to help protect financially vulnerable people—those who are struggling financially and repayments may be difficult to make. I believe this research shows that New Zealanders are sensible by not taking out large loans in their retirement years, and that appropriate safeguards are in place. What is vital in the future is the need for people to be financially literate, so they understand what financial options are available to them and what the most appropriate might be.”

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