Reverse mortgage products have been slowly gaining popularity among consumers and financial institutions alike as increasing numbers of people aged 60 and above discover they don't have the superannuation or other retirement savings they need to keep them in the lifestyle they have become accustomed to or aspired to.

But the real growth is yet to come.

Research group Datamonitors estimates 13,000 reverse mortgage loans were written in 2005 for a total of $647 million, compared with just 5000 loans for $250 million in 2004.

An ageing population, longevity, a recent boom in property prices across the country and a shortfall in retirement savings outside the home are expected to mean $1.1 billion reverse mortgage loans are advanced to senior Australians in 2006, growing to $2-$3 billion in the next two to three years. Another factor in the growing popularity of reverse mortgages is undoubtedly the rise in house values over the past few decades.

Modest houses are now, in some cases, worth significant sums, and the level of housing equity dwarfs the other savings of most older Australians. It is estimated that more than $335 billion of home equity is held by those over 60.

Daniel Burke, business manager of Mariner Financial's equity release product, attributes a changing attitude to inheritance as another reason behind the popularity of the product.

Where once it was a given that the next generation would inherit the family home, many of those probable beneficiaries would rather see these people enjoying life.

"A lot of the kids of baby boomers want their parents to have a retirement and to have a life. They recognise that their grandparents might not have enjoyed their retirement and don't want the same of their own parents," he says.

Kieren Dell, executive director, Senior Australians Equity Release Association of Lenders (Sequal), believes the key to the growth rate of loans is the baby boomers.

"Whereas the frugals didn't take the loan unless they really needed it, for the baby boomers it is not a last resort. Their attitude is: my house is part of my asset base for retirement, how do I access it?" Dell says.

"The baby boomers, who are now moving into retirement, have a different attitude to their retirement and lifestyle to their parents. They are focused on enjoying their life after years of working and want to travel, renovate, buy a new car and live their life to the full.

"To maintain this lifestyle, they require more than is provided by the age pension and more than their superannuation savings will fund."

In its simplest form, a reverse mortgage is a loan that allows seniors to borrow against the equity in their home, thus providing additional funds to support themselves in retirement. No repayments are required during the loan term, with the total interest, fees and charges repaid when the home is permanently vacated by all borrowers or at their death. Where borrowings have been limited to a small proportion of the overall value of the home and taken in lump sums as needed, the baby boomers are expected to be just as attracted to the option of taking the equity in regular weekly or monthly payments.

"Where the frugals used the equity to buy a new car or to pay for medical expenses, baby boomers will be looking for ways to use their house to supplement their weekly income," according to Dell.

Some product providers are catering to baby boomers by allowing a reverse mortgage loan where a younger member of a couple is 55 years of age, traditionally restricted to people aged 60 and above.

One of the worst things that could happen with one of these products is that the borrower or their estate ends up owing more than the sale value of the house and face eviction.

Fortunately, most lenders in Australia have a no-negative-equity guarantee. Other features of equity release products include regular drawdowns rather than lump-sum-only withdrawals, the ability to borrow against investment properties, the ability to quarantine some of the equity from the lender, the ability to retain the loan while in aged-care and fixed rates for life.

Financial services group Mariner Financial is one of the few reverse mortgage providers to make financial planning advice mandatory.

Realising that reverse mortgages are a fairly new product category with potential pension, tax and inheritance implications for retirees, they believe it is vital that they receive sign-off from a financial adviser and a solicitor and that customers discuss the loan with their beneficiaries.