Reverse mortgages and home reversion schemes are growing in popularity in Australia and overseas as a means of funding long term care, home modification, home maintenance and to supplement income. While they can be a handy source of extra cash for retirees, without having to sell the family home, they can also be complicated and can expose vulnerable consumers to serious financial risks as well as affecting eligibility for the age pension and tax obligations.
The Australian Housing and Urban Research Institute (AHURI) has conducted a comprehensive study of the Australian industry and the influence these products have on retirement decisions and planning. This report reviews the range of products currently available, examines the experience of older people, and the impact of the Global Financial Crisis. It also highlights policy implications for government in the provision of housing, aged care services and social security benefits, as well as identifying potential regulatory improvements.
Major national reform of consumer credit regulation is currently underway, which is expected to address reverse mortgage products. The AHURI research concludes that if these products are to be used as part of the government’s “ageing in place” policies, to supplement the housing and care support needs of older homeowners, greater guidance and support is needed to protect the most frail and vulnerable consumers.
It recommends that the reverse mortgage market could be improved through increased regulation, better advice to consumers, reduction in break fees and better protection of vulnerable consumers through continued monitoring. It questions whether reverse mortgages are closer to being a financial product rather than a credit product for regulatory purposes, and the role of the Australian Securities and Investments Commission (ASIC).
The report also suggests that ASIC could undertake further analysis based on the work of the National Information Centre on Retirement Investments (NICRI) reverse mortgage helpline.
To view the full report click here:
http://www.ahuri.edu.au/publications/projects/p70512
To visit the NICRI website click here:
http://www.nicri.org.au/
To visit the Seniors Housing Online website click here:
http://www.seniorshousingonline.com.au/
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