Australian Prime Minister Scott Morrison, the nation’s head of government, announced that the upcoming mid-year budget proposal will have a refreshed reverse mortgage program available to eligible Australian seniors, with a new name of the “Home Equity Access Scheme,” a change from the former “Pension Loans Scheme” (PLS) name. This is according to the Australian finance publication Financial Standard.
“We’ve had a pension loan scheme for some time, but this is making it even more attractive by reducing the interest rate,” the Prime Minister explained to radio presenter Spencer Howson in a recent interview, according to the publication. “I know many pensioners in particular, as I was Treasurer when we first started opening up this scheme and making it more attractive, are concerned about going into reverse mortgages with banks and those sorts of things.”
The new reverse mortgage program will be open to all age-eligible pensioners in Australia, including those who have self-funded their retirements, according to the publication. Addressing some of the outstanding concerns about such products, Prime Minister Morrison described the reverse mortgage program within the country as one that enables additional options for the nation’s seniors.
“I understand those concerns,” Morrison said referring to reputational challenges. “There’s some good products there, but what this does is provides another, what would be considered a safe alternative for them to be able to access the equity in their own home to improve their incomes and their living standards in their retirement years.”
A language that should be familiar to American reverse mortgage advocates was also used by the prime minister, who describes the nation’s reverse mortgage program as a tool that can assist a particular type of borrower with opening up financial options in retirement.
“It just gives them another tool to be able to have a better quality of life in their retirement and using that equity in their own home to be able to achieve,” Morrison said. “Now, it’s a choice. It’s an option for them and it’s there to give people that opportunity.”
Colin Zhang, an actuarial academic at Sydney’s Macquarie University and Ning Wang, an associate research fellow at Macquarie University recently wrote about a problem for the program in Australia that should also sound familiar to Americans: very few pension-age Australians have availed themselves of the program.
“As attractive as the PLS might appear, hardly any of the four million or so Australians aged 65 and over have taken it up, perhaps as few as 5000 – one in every 800,” they wrote according to Financial Standard. “So, in this year’s May budget the government announced two changes to make it more attractive.”
These included changes to the lump sum disbursement options, as well as a function that acts similarly to the reverse mortgage’s non-recourse feature in the United States.
Read the article at the Financial Standard.