A Reverse Mortgage over the Family Home as a Panacea for Ageing Societies? Comparative Lessons from Japan

This article evaluates the rise of the reverse mortgage as a means for senior citizens to convert equity in family homes into retirement income. It explains reverse mortgages in general terms and outlines the risks and potential benefits of this increasingly popular financial product to assess first, whether the product can be successfully regulated, and second, whether the product is desirable from a wider public policy perspective. The article first compares the regulation of reverse mortgages in the UK, the USA, and Australia. It outlines three models of regulation: minimalist, interventionist, and procedural. The article then evaluates the regulation of reverse mortgages in Japan in its specific legal and economic context. It detects there a recent increase in uptake correlated with a relatively low degree of regulation. It finds that the Japanese reverse mortgage market is ripe for the emerging procedural model of financial regulation, but this depends on surmounting significant political and logistical hurdles. The article then examines Japanese alternatives to reverse mortgages that may provide a more satisfactory means of providing secure housing and retirement income for senior citizens in Japan and other jurisdictions. The article concludes that, in the absence of regulation that genuinely safeguards the interests of consumers, these alternatives are far less risky and are equally compelling from a public policy perspective.