The number of older Australians who have signed up to Centrelink’s Home Equity Access Scheme has increased eightfold since the program was expanded three years ago. | By Caitlin Fitzsimmons
The number of older Australians taking out a reverse mortgage with the government has spiked over the past three years and is expected to surge again because of changes allowing participants to borrow a lump sum coinciding with the rapidly rising cost-of-living pressures.
Participation in the program, which has existed since the 1980s and was formerly called the Pension Loans Scheme, has been growing at more than 40 per cent a year since access was widened to include full pensioners in July 2019. It comes as the market for commercial reverse mortgages has dwindled. “Reverse mortgages were developed with great hope that they would provide the financial solution for asset-rich, cash-poor retirees.”Brody said he would encourage older Australians to do their sums to understand how the debt would compound and to consider other options such as downsizing.
Prior to 2019, participants in the government scheme could draw a fortnightly income up to the full pension rate, including any existing pension payments, making it effectively only available to part pensioners and some self-funded retirees. From July 2019, borrowers were able to borrow to fund a fortnightly income of up to 150 per cent of the full pension rate.
Comparison site Canstar says lenders offering reverse mortgage loans include Household Capital, Heartland, IMB, P&N Bank, G&C Mutual Bank and Gateway Bank. But Mickenbecker said early offerings in the reverse mortgage market delivered adverse outcomes to customers and while this was largely fixed by regulation, it still came with “significant trade-offs and some risk to the borrower”.
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