ANTICIPATING A REVERSE MORTGAGE ADOPTION IN CROATIA

NOVOKMET Ana Kundid and Matković Martina
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NOVOKMET Ana Kundid: Faculty of Economics, Business and Tourism, University of Split, Croatia
Matković Martina: International Medical Corps, Split, Croatia

Studies in Business and Economics, 2020, vol. 15, issue 3, 132-151

Abstract: Reverse mortgage is an alternative source of financing of elderly population that usually has some homeownership, but insufficient income and savings to support desired or indispensable level of consumption. It is a financial innovation mostly provided by banks and finance companies to seniors, which enables a home equity conversion to liquidity without selling or leaving a property. In circumstances of ageing society, modest pension income, increasing long-care expenditures, limited access to loan market and high risk of poverty, a reverse mortgage product has a solid ground for implementation and adoption. Croatia is an ageing country with negative demographic trends, which accelerated in the last few years. Retired population which is “home rich and cash poor” is particularly vulnerable and at strike to sustain a decent life. Therefore, we raised a question concerning the justification of the reverse mortgage introduction in Croatia. After giving an insight into some contextual factors, an estimation of the potential demand for reverse mortgage service in Croatia was made by carrying out an exploratory – pilot study with around 120 questionnaire respondents. We found out that there is a poor knowledge about the reverse mortgage among Croatian financial consumers (i.e. only 24% of respondents are familiar with the reverse mortgage term), as well as the lack of demand for this home equity extraction instrument. Namely, almost 67% of respondents would not accept a reverse mortgage instrument regardless of the circumstances, primarily due to socio-cultural reasons.

Keywords: demand for financial services; reverse mortgage; banks; questionnaire; Croatia (search for similar items in EconPapers)
Date: 2020
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