The head of a challenger mortgage franchise is urging the government to endorse reverse mortgages rather than focus on getting seniors to downsize their home – which could help decrease the financial burden of our ageing population and boost GDP at the same time.
Michael Russell, the new chief executive of MoneyQuest, said he agrees with the government's idea to give retirees who downsize a one-off exemption from stamp duty and then quarantine the sale proceeds of their family home, however, he doesn’t think that seniors should be rushed to downsize.
“This to me is the real issue and I don’t believe it has commanded enough consideration,” Russell said.
Those who are for incentivising seniors to downsize argue that it would take the pressure of the age care pension by helping retirees to create new income streams, whilst also providing a solution for improving housing supply and affordability.
However, Russell says the notion that housing supply will be enhanced to improve affordability with seniors downsizing is fundamentally flawed.
“To be encouraging seniors to prematurely downsize in a hot housing market and then compete head on with first home buyers and investors for much sought after property, can only lead to a further imbalance in the market.
“First home buyers would most likely be further shut out with the price of smaller footprint properties escalating at a time when regulators such as APRA
are desperate to cool.”
In addition, Russell says there is plenty of research supported by anecdotal evidence to suggest that a senior’s quality of life and longevity is actually enhanced while remaining in the family home for as long as practical. As such, Russell is urging the government to endorse reverse mortgages.
“To this end, MoneyQuest is unashamed of its support for reverse mortgages to assist ‘asset rich, income poor’ seniors to unlock the equity in their home and truly improve their quality of life.
“In the absence of any contrary solutions, both sides of government are urged to endorse the product to get it out of the shadows and into the light, as a legitimate funding solution.”
According to Russell, endorsing reverse mortgages will also help boost GDP.
“With over 80 year old borrowers generally able to unlock up to 32% of their home’s value, this would equate to up to $294 billion in potential consumption spending and the generation of game-changing GST revenues. All while respecting the rights of our seniors to stay in the homes and elect to do with their home equity as they choose,” Russell said.