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Convincing Australians to embrace reverse mortgages – where the bank pays them money instead of the other way round – could be the key to reducing the huge cost of the age pension, experts say.
The local reverse mortgage market, where the St George, Bendigo and Adelaide Bank, and Bankwest were the biggest providers, all but collapsed in the global financial crisis seven years ago and only a handful of the financial products are available from the major banks.
"In the CFC a number of reverse mortgages went bad very quickly because they were inappropriately structured and put people into a position of negative equity. Now they carry a reputational risk for the big banks because amid all the financial planning scandals they don't want to be perceived to be ripping off old people," Australian Centre for Financial Studies executive director Deborah Ralston said.
Allowing retired people to raise money through their own homes is seen as a way to make it more politically palatable to reduce the government pension to people who made have a lot of wealth in property.
For the full story follow link to Australian Financial Review