Government may support reverse mortgages
By
Adam Smith
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12/04/2011 6:00:00 AM
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1
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Reverse mortgages may see government support as Australia’s population ages, a reverse mortgage broker has predicted.
Darren Moffatt, managing director of Seniors First, has claimed that equity release will be crucial to fund aged care in the future.
“The Productivity Commission has stated that there is not enough money in the budget to fund aged care without some sort of equity release program,” Moffatt said.
Moffatt believes this budget shortfall may mean government involvement in the reverse mortgage market. According to Moffatt, the products will become increasingly important as more Australians head toward retirement age and find themselves cash poor, and the government finds itself increasingly unable to meet the growing demand for aged care.
“It is possible the government may step in to actively support the reverse mortgage sector,” Moffatt commented.
The reverse mortgage market has seen many lenders exit following the GFC. However, Moffatt believes lenders will begin to re-enter the market as the government becomes more involved with equity release and reverse mortgage products become more regulated.
“At one time, there were around 22 lenders in the reverse mortgage space. We’re now down to three lenders. We might be seeing some new lenders come into the market next year. I expect to see a proliferation of new lenders and products entering the market,” he remarked.
Moffatt said reverse mortgage products are set to be included in phase two of NCCP regulation. But Moffatt does not believe this regulation will see drastic changes to the rules governing reverse mortgages.
“It is likely ASIC will accept all of SEQUAL’s recommendations,” he said.
Related stories:
ASIC to focus on advice to the aged
Broker equity release credentials disputed
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Twiggy on
12 Apr 2011 12:58 PM
The Productivity Commission's draft report into "Caring for Older Australians" evaluated the funding of aged care, considered insurance policies and long-term savings accounts, and finally recommended Reverse Mortgages, It is estimated only $120m out of the $11b Accommodation Bond industry is currently funded by Equity Release. Stage 2 of the NCCP will have to include the use of Equity Release with aged care when considering legislation. ASIC's RG209 seeks additional protection for senior borrowers and the requirement for "knowing your client" may make face-to-face interviews as mandatory. Other considerations may include banning the use of funds for buying/investing in other financial products.
The cost of care is fundamental to the PC's recommendation and "user co-contribution" is seen as necessary in improving and maintaining aged care, either in Residential Care or at Home. And this is the same response given by the UK Government's current enquiry into aged care.
Specialised third party distribution in Equity Release will also need to understanding options and policies within Centrelink guidelines to optimise aged pension entitlements.
Paul Dwyer
Melbourne and Peninsula Reverse Mortgages