Retirement boon for older Aussies in mortgage revamp

Scott Morrison opens up mortgage loan scheme to help older Aussies fund their own retirements. Source: Getty

Senior Australians will be able to unlock the value of their homes to help fund their retirement under a revamped reverse mortgage scheme to be unveiled in Thursday’s mid-year budget update, it’s been announced.

Prime Minister Scott Morrison is spearheading an overhaul of the current pension loans scheme that’s tipped to “dramatically boost take-up of the cashflow support program” and allow retirees to supplement other income, The Australian reports today, Wednesday, December 15.

The pensions loans scheme enables older Australians to use their real estate as security against non-taxable fortnightly loans and lump-sum payments.

The Government has rebranded the scheme as the more inclusive “home equity access scheme” to boost awareness that it’s not just for pension recipients, but open to all Australian property owners who have reached pension age.

Under the revamp, the government will take advantage of record low rates to slice the scheme’s interest rate from 4.5 to 3.95 per cent on January 1, reported The Australian. This will reduce borrowing costs and give seniors access to loan payments for longer.

The lower interest rate compares favourably with current commercial reverse mortgages for owner-occupied homes, which range between 5 and 5.6 per cent.

In a clear bid to woo the “retiree vote” in next year’s election, further changes to the scheme were also announced in the May 2021 budget; subject to legislative approval in parliament early next year. These changes will enable property owners to access lump-sum advance payments from July 1, 2022.

“Home-owning seniors aged 66 and over will be able to receive two lump-sum payments in a year capped at 50 per cent of the annual age pension rate,” reported The Australian.

Social Services Minister Anne Ruston told the newspaper that the goal was to give the nation’s 3.8 million senior Australians “more choice and control of their retirement lifestyle”.

“We want to give older Australians more confidence to tap into home equity to enhance their retirement living standards,” Senator Ruston said.

“We know many older Australians have worked hard to accumulate wealth in the form of real estate equity.

“The scheme can help people access this equity to supplement other income and improve overall wellbeing in retirement. The lower interest rate, together with the upcoming enhancements, will make the scheme an attractive option for many retirees looking for a boost in their income.”

Is the reverse mortgage scheme revamp a win for you?

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