Australians are taking out a reverse mortgage to provide extra income, instead of using the extra funds to refurbish their house or go on holidays, a report found.

Kevin Conlon, chief executive at the Senior Australians Equity Release (SEQUAL), said there's been a significant move away from ‘desire-based' expenditure to ‘needs-based' including topping up their overall income.

"People approaching retirement want to live well and they recognise their limited financial resources are going to be inadequate to meet that challenge," he said.

"It's that classic situation; asset rich, cash poor. The home is increasingly being considered a part of the planning process as a means to unlock the substantial wealth stored in property."

Deloitte's reverse mortgage market study, commissioned by SEQUAL, supports Conlon's observation. The study found the top three uses of reverse mortgages are home improvement, a regular income and debt repayment.

Martin Lynch, head of reverse mortgages at the Royal Bank of Scotland (RBS), said, their research also found a growing preference to use a reverse mortgage to boost income.

He said reverse mortgage products had evolved to allow clients to receive their equity release payments over a period of time instead of lump sum.

"When reverse mortgages started, the product only had a lump sum option so people who were looking for $200 per month extra were having a lump sum coming their way, which mucked up their Centrelink and pension [payments]," he said.

Meanwhile, the Deloitte study found the reverse mortgage market grew 9 per cent, in terms of outstanding balances, in the year to December 2009.

There were more than 2,600 new borrowers in the second half of that year and the average settlement size was $53,000.

Despite the financial crisis, the sector has grown from $850 million in market size back in 2005 to $2.71 billion by 2009. However, total facility, or the amount of funds that could be drawn down, peaked in 2006 at $714 million to $367 million in 2009.

The study found brokers and financial planners accounted for half the sale of reverse mortgages.