Reverse mortgage uptake falling ahead of new rules
The number of Aussie homeowners choosing to take up a reverse mortgage could fall further from next year as new federal regulations come into force.
Under a planned market shake-up for the new year, the government aims to ban contracts which allow negative equity to build up on a reverse mortgage and will also increase information disclosure requirements on reverse mortgage deals, News Limited reported.
Reverse mortgages are typically only available to people aged 60 years and over and involve borrowing money against the value of a home. No repayments are then made because the interest is added to the total debt, allowing the lender to receive its money and interest back when the property is sold.
According to News Limited, the uptake of reverse mortgages has slowed markedly in recent years as several major lenders have withdrawn from the market and previous regulations have made the loans less profitable. Borrowers aiming to improve their financial standing can also opt to compare home loans and consider switching provider.
Commenting on the reverse mortgage market, Kevin Conlon of industry lobby group SEQUAL said: "The growth has slowed mainly because consumers are more cautious and they are delaying their retirement."
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