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.