Reverse Mortgages, Financial Inclusion, and Economic Development : Potential Benefit and Risks
This paper examines the state of reverse mortgage markets in selected countries around the world and considers the potential benefits and risks of these products from a financial inclusion and economic benefit standpoint. Despite potentially increa...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/158231580411007157/Reverse-Mortgages-Financial-Inclusion-and-Economic-Development-Potential-Benefit-and-Risks http://hdl.handle.net/10986/33290 |
| Summary: | This paper examines the state of reverse
mortgage markets in selected countries around the world and
considers the potential benefits and risks of these products
from a financial inclusion and economic benefit standpoint.
Despite potentially increasing demand from aging societies
-- combined with limited pension income -- a series of
market failures constrain supply and demand. The paper
discusses a series of market failures on the supply side,
such as adverse selection, moral hazard, and the costly
regulation established to address these problems, leading to
only a small number of providers, even in developed markets.
Demand-side constraints are equally relevant, in particular
high non-interest costs, abuse concerns, and the inability
of reverse mortgages to cover key risks facing the elderly,
particularly health and elder care. In developing countries,
constraints are likely to be even higher than in advanced
economies, due to high transaction costs and lack of
consumer knowledge and protection. The enabling conditions
for such markets to develop are outlined, along with
examples of regulatory oversight. The paper concludes that
these still seem to be largely products of last resort
rather than well-considered purchases as part of good
retirement planning. |
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