Are rising interest rates and inflation impacting reverse mortgages?

With rising interest rates, surging inflation, and a potential recession on the horizon, your borrowers are likely uneasy about the current economic landscape. The best way your financial institution can support them is by ensuring they are armed with information on how to best prepare for an economic downturn.

What do reverse mortgages have to do with anything?

As you probably know, a reverse mortgage is a home loan designed to support borrowers who are 62 and older. In this type of home loan, the homeowner (or homeowners, if it is owned jointly) surrenders equity in their home in exchange for the monthly mortgage payment. Unlike traditional mortgages, which decrease as you pay down the loan, reverse mortgages rise over time as interest on the loan accumulates. This option can provide older borrowers with a supplemental retirement income option.

Since the Fed raised interest rates in an effort to reduce inflation, borrowers have been wondering if they may have missed the boat on benefiting from a reverse mortgage. Of course, each borrower has to make this decision for themselves, but with inflation hovering between 8.5-9% and interest rates continuing to rise, it’s a good idea to discuss reverse mortgages with your borrowers as an option to fight inflation.

 

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