Reverse mortgage can’t solve Europe’s pension problems



Brussels, 27 September 2010


DEMHOW project final seminar on 27th October


Reverse mortgage can’t solve Europe’s pension problems



Wider access to reverse mortgage, which allow people to release the capital tied up in their homes, while continuing to live in them until their death, would provide only limited help in solving Europe’s  pension adequacy problems.


This was the general conclusion of the DEMHOW¹ project, an EU-funded research project, reported at the European Commission headquarter Berlaymont Building in Brussels on 27 October 2010.

The seminar addressed one of the suggestions mooted in the Green Paper² on Pensions that access to reverse mortgages might be extended as an additional pension pillar to maintain an adequate income in old age without extra cost to the public purse. Many EU Member States do not have a legal framework that permits reverse mortgages, and few have a market of significant size.  Action by the EU’s Internal Market provisions has the potential to extend product availability, but is this the solution to the pension crisis?

For many older people, home ownership already provides a means of living rent free but if the capital tied up in their homes was released and used to generate cash, this could provide a substantial boost to their disposable income, as capital invested in their home accounts for over half of all the personal wealth held by older people across the EU.

However even if most retired home owners took out a reverse mortgage, this would not change the financial position of the 25% who rent and who are most likely to have low incomes.  Those with most to gain from a reverse mortgage, because they have the most valuable homes, also often have the largest pensions. So, widespread use of reverse mortgages could widen income inequalities while doing little to reduce the risk of poverty among older people with inadequately low pensions.

In addition, it would not necessarily be a cheap option for public authorities. Establishing reverse mortgages as a new pension pillar might require that public authorities finance incentives to encourage home ownership and guarantee reverse mortgage products, all rather costly measures that would be necessary to overcome citizens’ anxieties and reluctance to “eat up” their children’s bequest.

Commenting on the findings, Professor John Doling, leading housing expert and coordinator of the DEMHOW project said, “wider access to reverse mortgage products would benefit many older people, but it is not a good substitute for social provision

The outcome of the DEMHOW project confirms that while easier and safer access to reverse mortgage might be welcome in some countries, forcing older people to release the equity tied in their homes to compensate for the decline in pension promise and increasing long-term care costs is not acceptable, concluded Anne-Sophie Parent, Director of AGE Platform Europe, who chaired the seminar.

For more information: Maciej Kucharczyk at 

Link to the event:




Note to the editor


1   DEMHOW (Demographic Change and Housing Wealth) is funded by the EU under its Framework 7 Programme.  It involves research partners in 10 member states, with an Advisory Board chaired by AGE and with representatives of European Mortgage Federation, RICS Europe, and OECD.  Further findings of the project can be found at

2   Green Paper on Adequate, sustainable and safe pension systems, Brussels, 2010.


Link to the press release in pdf format

Communiqué de presse en français

Thursday 28 October 2010
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