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Cash-strapped American seniors are turning to reverse mortgages, a controversial type of loan that soared during the financial crisis, as a tightening economy drives ageing homeowners to find ways to make ends meet.

The number of federally insured reverse mortgages rose more than 6 per cent in the 12 months ending September, according to government data compiled by the National Reverse Mortgage Lenders Association.

Several US lenders told the Financial Times that sales of reverse mortgages have jumped this year as looming cuts to government benefits and persistent inflation have weighed heavily on older people.

“In terms of the drivers here, it’s really that the math doesn’t math,” said Sarah Edelman, executive vice-president of policy and programmes at housing non-profit National Community Stabilization Trust. “You’ve got people living longer with less retirement resources.”

With a reverse mortgage, a borrower, typically age 62 or older, gets cash from a lender in exchange for the equity in their home, while continuing to live there and pay taxes and insurance. The loans must be repaid with interest at the end of their term, usually when the borrower moves out, sells the home or dies.

Reverse mortgages are controversial because of the increased risk of foreclosure if customers fall behind on their tax or insurance payments.

Mark Ferguson, 80, is typical of the borrowers turning to reverse mortgages. The retiree, who lives in Washington state, receives about $1,800 per month in financial support from the US government.

Ferguson took out a reverse mortgage with Finance of America 11 months ago. When he was confronted with a bill for new dental crowns that he struggled to afford, he used his reverse mortgage payments to cover it.

Specialist lenders Finance of America, Longbridge Financial, New American Funding and Rate all said they had seen a significant rise in the number of customers seeking reverse mortgages, due in part to increasing cost of living pressures.

“For several quarters now, we have been hitting or exceeding forecasts for overall home volumes within the space,” said James Mittleman, an executive at reverse mortgage lender Finance of America. “There is definitely a growing appetite for the products.”

Call inquiries about reverse mortgages at New American Funding, a California-based lender with a $73bn loan book, were up 20 per cent compared to the year before, the company said.

Rate, another mortgage lender, said its annual growth in reverse mortgage clients was 64 per cent this year.

Despite recent growth, the number of new reverse mortgages remains far below its financial crisis peak and lower than recent highs reached during the Biden administration.

In 2009, 114,692 federally insured reverse mortgages — known as Home Equity Conversion Mortgages or HECMs — were taken out, compared with 28,172 in 2025.

Since the financial crisis, the US government has also developed new safeguards to protect borrowers, including requiring their credit history and ability to pay home insurance and taxes to be factored in when deciding whether to approve their HECMs.

But lenders including Longbridge Financial and Finance for America point out that a significant part of the recent growth is coming from so-called proprietary products on the lightly regulated end of the market.

“Longbridge delivered a record quarter for proprietary reverse origination volumes,” said Laurence Penn, chief executive of Ellington, Longbridge’s parent company, in an earnings call last week.

Such loans are not insured by the government, do not benefit from these protections and are sometimes only available for higher-value homes.

For non-HECM reverse mortgages, the regulatory landscape is “kind of like a wild west,” said Odette Williamson, a senior attorney at the National Consumer Law Center.

While prospective HECM borrowers have to meet with a counsellor to talk through the product, its terms and their ability to pay back the loan, this is not always a requirement for proprietary products.

She added that the National Consumer Law Center was “concerned about new and emerging home equity products”, saying “we would want to see a more highly regulated market on that end”.