Reverse mortgages may cut pension costs, experts claim

Font size :
Experts believe reverse mortgages (the manner in which the bank lender pays Australian borrowers money instead of vice versa) could cut the huge cost of the age pension.
 
However, there are certain risks as the local reverse mortgage market collapsed seven years ago during the GFC. To date, only a handful of the financial products remain from the major banks, the Sydney Morning Herald reported.
 
Partakers of the local reverse mortgage market were primarily St George, Bendigo and Adelaide Bank, and Bankwest.
 
National Seniors Australia chief executive Michael Oneill believes the social benefits of helping older people stay in their own homes longer could be done by reverse mortgages, as long as there will be improvements in the quality and choice available.
 
However, a warning was given by Australian Centre for Financial Studies executive director Deborah Ralston.
 
"In the GFC a number of reverse mortgages went bad very quickly because they were inappropriately structured and put people into a position of negative equity. Now they carry a reputational risk for the big banks because amid all the financial planning scandals they don't want to be perceived to be ripping off old people," Ralston was quoted as saying.
 
Moreover, for Steve Freeborn, senior actuary of actuarial firm Rice Warner, “the lack of depth in the Australian reverse mortgage market is a big problem when it comes to implementing these changes”.
 
The Australian Securities and Investments Commission (ASIC) is also one of those which appear wary of reverse mortgages.
 
"If you are the sole owner of the property and someone lives with you, that person may not be able to stay when you die," ASIC's MoneySmart website said.
 

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan

Mortgage News and Articles

How to tell when a housing market is cooling How to tell when a housing market is cooling

You need to check clearance rates, listings, and the price gap, among other factors Read more

Growing demand for green apartments in Sydney Growing demand for green apartments in Sydney Both owner-occupiers and investors favour eco-friendly buildings for their energy-saving features and reduced environmental footprint ... Read more

Are property investors as rich as they appear? Are property investors as rich as they appear? A multi-property portfolio doesn’t guarantee easy millions ... Read more

Be proactive about getting a better mortgage deal Be proactive about getting a better mortgage deal Apathy could be costing you a considerable amount of money over the lifespan of your loan ... Read more

More mortgage news and articles

Sponsored Links

Saturday, Sep 23, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Let us help you find the right home loan for your needs.

Tell us a bit about your circumstances:
  • Purpose of mortgage
  • Household Income
    $
  • How much do you want to borrow?
    $
  • How much deposit do you have?
    $
  • How much is your house worth?
    $
  • How much do you still owe on your mortgage?
    $
  • What type of mortgage do you have?


  • How much is your new home?
    $
  • How much do you want to borrow?
    $
  • How soon do you want a mortgage?
Next
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords