The Federal Government wants to raise awareness and reboot its reverse mortgages scheme that allows retirees to unlock the equity in their homes to help fund their retirement while remaining in their home.
The Minister for Families and Social Services Anne Ruston said the government is aiming to give retirees more choice regarding tapping into their home equity which was a recommendation from their retirement income review.
The scheme is currently called the Pension Loan Scheme and will likely be renamed and in the Federal Budget was broadened to allow single retirees to borrow $12,000 and couples $18,000 against their home equity.
The scheme currently offers fortnightly payments worth up to 150 per cent of the old age pension to all home-owning retirees over 66.
“We want to provide a product to improve their retirement outcomes while drawing down on an asset and people remain living in their own home,” Ms Ruston told Australian Financial Review.
“If they want a new car or want a house renovation, this will help them do it.”
“We’re not going to be pushing it on people, but it’s about making sure people realise it’s available.”
Senator Ruston said to raise awareness through public messaging and branding, the government will consult on a possible name change.
“The name has mistakenly led people to believe that self-funded retirees don’t have access to it, which is not the case,” she told AFR.
“I think it could be improved and self-funded retirees haven’t picked it up anywhere near the level you think they might like to.”
Economist Jeff Oughton said the 4.5 per cent interest charged on the reverse mortgages should be reduced to be closer in line with home loan rates.
“Few elderly Australians are aware of the package,” he told AFR.
“It does not impact their government age pension, is non-taxable and too many elderly Australians end up with a much worse deal at banks and non-banks that should direct them to Centrelink.”