Australia: Federal government extends reverse mortgages to full-time pensions in budget

As part of its initiatives for pensioners in the 2018- 19 budget, the Federal government will now allow full-time pensioners over 65 years old to take out a reverse mortgage of up to $11,799 every year. Prior to this announcement, reverse mortgages have only been available to part-time pensioners.

Although reverse mortgages have traditionally been a high niche product in Australia, there is the opportunity for this product to grow in importance with an ageing population and high levels of property ownership amongst Baby Boomers.

Being able to utilise property to access capital to fund retirement could be valuable to retirees who are asset-rich but have low cash flow. In addition, to reverse mortgages, lenders can use other mortgage features to help older borrowers access capital.

RFi Group data from March 2018 shows that the importance of and satisfaction with redraw facilities increases with age, with around 3 in 5 borrowers aged 55 and over indicating the feature to be highly important and 2 in 3 saying they are highly satisfied with their redraw facility.

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