Seniors are using their home’s equity to take out loans at greater rates than ever, but there’s a risk they may be “eating their house” too early.
Reverse mortgages are on the rise as older Australians look to supplement their income by tapping into the value of their home.
The scheme underwent reform in 2019 to increase eligibility, reducing its annual interest rate from 5.25 per cent in 2020 to 3.95 per cent in 2022.“It provides a flexible and secure way for them to supplement their retirement income,” she said.“Pension arrangements aim to strike a balance between assisting those who need it most, while also ensuring sustainability into the future in the context of an ageing population.
“If you don’t have much equity left, you risk relying solely on the government and entering residential care, instead of paying for at-home care.” Heartland Bank saw an 18 per cent increase in new reverse mortgages in 2022-23. It charges 9.75 per cent interest, compounding annually.
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