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

A 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 problems in old age, it has not been much used in practice. The literature is inconclusive about possible motivations for this, which include bequest motives, limited understanding of the product, financial education and mistrust in financial institutions. To test for barriers to the use of RM, we exploit data from an original comprehensive qualitative and quantitative research study conducted between May and September 2024 in Italy, a country with a pronounced population ageing, a high home ownership rate and a traditional family structure. In order to assess who and why is still afraid of RMs, we test four hypotheses supported by household decision models by means of regression analysis. Two are our main results. First, contrary to theoretical expectations and the previous literature, bequest motives do not hinder interest in the RM, which in contrast is higher for homeowners with the present need to support grandchildren. Second, two are the most significant factors behind the lack of interest: low levels of financial education reflecting limited understanding of the product and its potential to address liquidity needs, and distrust in financial institutions. These results have relevant implications since they highlight the need for coordinated industry and policy efforts in improving targeted financial education initiatives, product transparency and trust in financial institutions as they are crucial conditions to increase the RM unexpressed potential.