Despite all the predictions over the years that reverse mortgages are the next big thing, the home equity release market continues to decline.

According to APRA’s latest data on ADI residential property exposures, total reverse mortgage balances fell 6.7 per cent to just A$2.3 billion in the year to June.

One of the few active lenders in the market is Heartland Group, which acquired Australian Seniors Finance in 2014 and has gone on to become the reverse mortgage leader.

Heartland’s Australian reverse mortgage portfolio grew 9.7 per cent to $A$1.07 billion in the year to June. In New Zealand, its reverse mortgage receivables grew 7.4 per cent to NZ$601.5 million.

Heartland’s experience suggests that the market’s biggest problem might be one of supply not demand and that if more lenders were actively promoting the product the sector might grow.

One of the supply issues is funding. A couple of years ago property fund manager DomaCom announced that it was developing a reverse mortgage but the product has never come to market.

DomaCom chief executive Arthur Naoumidis said the company got a good response from brokers but when it approached superannuation funds and other possible funders it didn’t get any takers.

“We even looked at funding it through a pooled fund structure but it is a 15-year investment,” Naoumidis said.