It appears more retirees are taking advantage of the equity of their homes to fund their retirement, according to a report from The Sydney Morning Herald.
The report indicated that the number of retirees who accessed the government-backed Pension Loans Scheme (PLS) increased from 768 at the end of the 2018-2019 financial year to 4,039 by the end of March this year.
The recent federal budget introduced several changes in the scheme, which could further increase its uptake.
Under the changes, participants of the scheme will be able to access up to two lump-sum advances in any 12-month period, up to a total value of 50% of the maximum annual rate of the Age Pension. This will take effect starting 2022.
"The introduction of these advance lump-sum payments will increase the attractiveness of the Pension Loans Scheme for senior Australians by giving them the flexibility to pay for large one-off expenditures — such as replacing a car, to make home improvements or renovations, or to pay for aged care services," said Katja Hanewald, a senior lecturer at the University of New South Wales.
Another change was the introduction of the No Negative Equity Guarantee, which will ensure that borrowers will not have to repay more than the market value of their property.
"The changes announced in the budget show that the government is now taking active steps to expand and promote the Pension Loans Scheme," Hanewald said.