October 24, 2019 11: 44: 23
Treasurer Josh Frydenberg will review the Government’s reverse mortgage scheme to reflect Reserve Bank interest rates in the face of “gouging” claims from retirees.
- The Pension Loans Scheme was established in 1985 to allow retirees to supplement their retirement income by drawing down in equity in their homes
- The 5.25 per cent interest rate has not fallen despite three official cash rate cuts this year
- National Seniors Australia describes the rate as a ‘double standard’
The current 5.25 per cent interest rate for reverse mortgages under the Government’s Pension Loans Scheme has not fallen despite three official cash rate cuts this year, most recently to 0.75 per cent in October.
The Pension Loans Scheme was established in 1985 to allow retirees to supplement their retirement income by drawing down on equity in their home for a line of credit.
Retiree groups have accused the Government of double standards for holding the reverse mortgage rate at 5.25 per cent since 1987 while slamming banks for not passing on official rate cuts in full to mortgage borrowers.
National Seniors Australia chief advocate Ian Henschke said the unchanged reverse mortgage rate exposed the Government to claims “assets-rich and cash poor” pensioners were being gouged.
“If you’re attacking the banks, you’ve got to do something about your own house and get it in order. They (the Government) are balancing the budget on the backs of pensioners and retirees,” Mr Henschke told the ABC’s AM program.
“I think it’s pretty clear there’s double standard here. The Government is there supposedly to help pensioners, not make money out of them.”
The review means a small rate reduction is likely for 1,100 Australians who use the scheme to unlock the equity in their homes.
While the review will consider recent Reserve Bank rate cuts, Mr Frydenberg said the Government’s reverse mortgage rate was lower than deals offered in the private sector.
“The interest rates for reverse mortgages are above standard mortgage rates reflecting their higher risk,” Mr Frydenberg said in a statement.
“The Government continually monitors the appropriateness of the interest rate for the Pension Loan Scheme to ensure the rates are reflective of current market conditions.”
National Seniors Australia is using the reverse mortgage rate to fuel calls for greater relief on the pension “deeming” rate used for pension income assessments that affect 660,000 part pensioners.
The Government commissioned the Australian Competition and Consumer Commission to investigate mortgage pricing after banks held back part of the October Reserve Bank rate cut.
Mr Henschke is visiting Canberra as part of a politically charged campaign and is expected to meet Mr Frydenberg to push for reverse mortgage and deeming rates to reflect the current low rates environment.
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