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Government reverse mortgage is not enough

Equity release specialist, Homesafe Solutions Pty Ltd (Homesafe), has welcomed further steps taken by the Federal Government in recognising the need to address the longevity concerns of Senior Homeowners and their desire to remain in their homes long-term, rather than downsize.

Whilst acknowledging the expansion of access to the Pension Loans scheme may assist some seniors to meet day-to-day living costs, the scheme, more broadly, recognises the opportunity to use the wealth in the home to provide access to financial support, and is consistent with the view the family home, as a store of wealth, has become the fourth pillar of the retirement income system. 

Homesafe General Manager, Ms Dianne Shepherd, said that “We are supportive of any measure which can assist seniors to stay in the workforce, support the needs of retirees to ‘age in place’, and provide a national program for the recording of Enduring Powers of Attorney to protect the more vulnerable sections of our community. 

“However, we hope the Government will consider providing more comprehensive support to providers of equity release solutions in the private sector, to assist the wider ageing population whose financial needs may not be met by such a scheme.”

Historically, fewer than 1000 retirees have taken up the Pension Loan Scheme, which creates a debt to the Commonwealth Government subject to a compound interest rate and secured by a statutory charge over the home. Whilst a small segment of senior homeowners may seek to apply for the expanded scheme from July 2019, there will remain a significant number of homeowners over 60 years of age who will require access to more substantial funds to support their retirement needs either at pre-retirement stage, or over the long-term. 

Homesafe assists an increasing number of over 60s to discharge mortgage debt for lifestyle purposes, renovations or assisting family members, by providing a debt-free alternative to release the equity from the family home.

“The Homesafe equity release product was designed to enable senior homeowners to access the wealth tied up in their homes by selling a share of the future sale proceeds of their home. 

“Rather than taking out a capitalising interest loan and then carrying the risk of future property growth rates as the debt increases, with Homesafe the homeowner can sell a part of their home today and protect a share of the future equity in their home for their own needs or to leave to their Estate.”

Homesafe says the role of equity release will become more important as the number of Australian ‘baby boomers’ reaching retirement continues to grow, and it is crucial that seniors understand the options which are available to them now, and what impact their decisions may have in future.  

“Government has an unprecedented opportunity to recognise the role of equity release in Australia, not only the benefits for individuals but also the wider economy, and to support the efficacy of the industry by working with providers of equity release products to ensure the wider ageing population can access the stored wealth in the homes when they need it the most.”