Who (and why) is still afraid of Reverse Mortgages? Results from survey in Italy

The Reverse Mortgage (RM) allows older homeowners to borrow against their home, maintaining the right to live in the same. Against its potential to cope with liquidity problem in old age, it has not been not very used in practice. The literature is not conclusive about possible motivations for low take-up, which include bequest motives, limited understanding of the product, financial education and mistrust in financial institutions. To test for (perceived) barriers to adoption of RM, we exploit data from an original comprehensive qualitative and quantitative research study conducted between May and September 2024 in Italy, a country characterized by a pronounced population ageing, a high home ownership rate and a quite traditional family structure. Based on regression analyses, we find four main results. First, interest in the RM is not negatively associated with bequest motives, whereby it is positively associated with the need to support grandchildren. This evidence hints to homeowners not being afraid of the RM because of bequest motives, but considering RM as a tool for early intergenerational transfers (i.e. early bequest) since it provides liquidity that can be used to help offsprings. Second, individuals with stronger financial education, proxied by self-perceived and actual understanding of RMs, are more likely to express interest in the product. Third, distrust in financial institutions is a significant factor behind the lack of interest in reverse mortgages. Fourth, the profile of homeowners who appear to be somewhat afraid of RMs is: older individuals, living in Northern Italy, graduated and with a more solid economic and financial situation. Overall, results highlight the need for coordinated industry and policy efforts in improving financial education, product transparency and trust in financial institutions as they are crucial conditions to potentially increase RM demand.