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Reverse mortgages are set to get more enticing for older Australians, with the Australian government’s Pension Loans Scheme to get a new name and a new lower rate in the new year.
The Morrison Government has revealed it will be revamping reverse mortgages in the new year; The Pension loans Scheme will be known as the Home Equity Access Scheme from 1 January 2022.
According to the minister for families and social services, Anne Ruston, the move “would give older Australians more confidence to tap into home equity to enhance their retirement living standards”.
Alongside the new name, interest rates for reverse mortgages will be cut from 4.50 per cent to 3.95 per cent per annum.
Minister Ruston expects the lower interest rates and enhancements to the scheme will make it “an attractive option for retirees”.
This may result in more retirees remaining in their family homes for longer.
The minister considers home ownership as “a bedrock of our society with Australians working hard to accumulate wealth in the form of real estate equity”.
“The Home Equity Access Scheme allows Australians over the Age Pension age – whether they are pensioners or self-funded retirees – to unlock this equity using a trusted Government product to boost their disposable income in retirement.”
Under the Scheme, older Australians will be able to access voluntary non-taxable fortnightly loan from the Government up to a maximum value of 150 per cent of the rate of the Age Pension.
To be eligible for the Home Equity Access Scheme, retirees must have reached Age Pension age, own real estate in Australia and meet residency and certain other requirements, but do not need to be receiving a pension payment.
The minister has also explained that “the new name also seeks to make sure that all retirees, not just those on a pension, know they can benefit from the Scheme if it suits their circumstances.”
The Home Equity Access Scheme overhaul will build on an entire package of proposed improvements, including the introduction of a No Negative Equity Guarantee and an ability to allow users of the Scheme to access capped lump sum advance payments.