28th Aug 2018
FONT SIZE: A+ A-
‘Poor understanding’ of reverse mortgages a concern: ASIC
Author: Ben Hocking
Reverse mortgages concern ASIC

Older Australians are increasingly turning to reverse mortgages to fund their retirement, but poor borrower understanding is placing them at risk, according to the Australian Securities and Investments Commission (ASIC).

For older Australians who own their home with few other assets, a reverse mortgage can allow them to draw on the wealth locked up in their homes, while they continue to live in their property.

An ASIC review, released on Tuesday, found that reverse mortgages are allowing older Australians to achieve their immediate financial goals – improving their lifestyles in retirement – but found they also raised “longer-term challenges”.

The review found borrowers had a poor understanding of the risks and future costs of their loan, and generally failed to consider how their loan could impact on their ability to afford their possible future needs.

Under legal protections in place since 2012, borrowers can never owe the bank more than the value of their property and can remain in their home until they die or decide to move out. However, depending on when a borrower obtains their loan, how much they borrow, and economic conditions (property prices and interest rates), they may not have enough equity remaining in the home for longer term needs like aged care.

“Reverse mortgage products can help many Australians achieve a better quality of life in retirement,” said ASIC deputy chair Peter Kell.

“But our review shows that lenders and brokers need to make inquiries that would lead to a genuine conversation with customers about their possible future needs, not just a set of tick boxes on a form.”

ASIC’s report also finds that there is an opportunity for lenders to reduce the risk of elder abuse. Under the new Code of Banking Practice, recently approved by ASIC, banks will be required to take extra care with customers who may be vulnerable, including those who are experiencing elder abuse.

Read the full ASIC review.

Have you ever considered a reverse mortgage? How thoroughly have you investigated the costs and charges?

Are you eligible for an Age Pension? Do you know your rights? The RetirePlanner™ tool has all the information you need.

RELATED ARTICLES

    Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.





    COMMENTS

    To make a comment, please register or login
    MICK
    29th Aug 2018
    11:10am
    Reverse mortgages are the tool of choice from the current government to rob poor retirees of their home, their pension and deny their children an inheritance. It is despicable but then that is what this government is.
    Please tell me where in the developed world governments cannibalise their older citizens....other than in Australia?
    Old Man
    29th Aug 2018
    12:11pm
    MICK, reverse mortgages were introduced to Australians in the 1990's and, since that time, there have been governments of both sides. Your one-eyed view of the world stops you seeing anything but a Labor government and you choose to airbrush the details that don't suit your manifesto.
    MICK
    29th Aug 2018
    1:10pm
    I'll have a "one eyed view" when I see WHO drummed this in front of the microphones and WHO turned this instrument into what it is today.
    We both know the answer to that OM. I never heard a Labor MP ever talk about reverse mortgages. Did you? On the other hand I seem to recall Morrison pushed this dirty product on a number of occasions.
    I'm sorry if my dislike of the current government offends you and the trolls working this website but I've never seen a group like this lot before and they frighten me. The way this lot behave is the making of dictatorships. As an intelligent person you too should be seeing the signs, unless of course you are a part of the problem.
    I look forward to this lot being shown the door. I need the rest.
    HarrysOpinion
    29th Aug 2018
    2:29pm
    Reverse Mortgage is a 'last resort' form of getting a loan by senior home owners. It's a bad, bad idea if you have no intention of repaying the loan. If you are disciplined to stick to a expense budget and pay off the loan in the shortest period of time to gain back equity then it's a judgement call
    Anonymous
    29th Aug 2018
    2:48pm
    Agree Mick - asset tests and reverse mortgages are the legacy of the labor government.
    Mongrels were responsible for the downward spiral
    Knows-a-lot
    29th Aug 2018
    3:37pm
    Bravo, Mick!

    Olbaid - read Mick's comment above. It's your mates, the Lieberal vermin, who push reverse mortgages.
    MICK
    29th Aug 2018
    4:39pm
    Olbaid - Reverse mortgages HAVE BEEN PUSHED RELENTLESSLY by the Abbott and Turnbull governments. You can run but you can't hide.
    OlderandWiser
    3rd Sep 2018
    2:27pm
    Mick, I despise this LNP and I agree they have pushed reversed mortgages and will seemingly do anything to deny seniors fair dealing. But it WAS the Labor Party that introduced assets testing. Sure, the LNP changed it unfairly and in a manner that will be economically harmful, as it will push people to shed assets to claim a pension, since many cannot achieve sufficient income from assets below $1 million (Couples probably need $1.5 million unless they are very fortunate with their investments!)

    Now Labor wants to totally demolish SFRs by taking away the franking credits that make up a large portion of the income of most SFRs. That means MORE pensioners claiming BIGGER pensions, less saving for retirement (because it just doesn't pay!), more dependency on the government for aged care and health costs, and rising costs for the taxpayer to support the aged. It's not just cruel and unfair to seniors. It's utterly IDIOTIC, and reflects massive incompetence and lack of vision.

    I would really prefer to vote Labor, but I can't while that policy is on the table. Won't vote LNP, because you are right about them. Where does that leave us? Totally stuffed, I think!
    Kaz
    29th Aug 2018
    11:15am
    If you do it to help your adult children, the debt is theirs when you die, so don’t panic.
    Jannie
    29th Aug 2018
    11:23am
    That is a nasty comment.
    Knows-a-lot
    29th Aug 2018
    3:38pm
    Jannie. How? It's just factual.
    GrayComputing
    29th Aug 2018
    11:18am
    It is time for all of us (that means you) to rant at our MPs and Senators daily to take action for human decency and a huge stress reduction for pensioners

    NO ASSET TEST FOR A PENSION EVER AGAIN!
    A pension is not welfare.

    Most economist say we will save taxpayers money by dropping asset testing because of the massive overheads cost in running Centrelink and the 10,000 conflicting rules.

    Hiring more Centrelink staff will only increase taxpayer’s costs for processing the creeping insane red tape monster system politicians and well paid bureaucrats have created.

    Help scrap it now. Become a hero.

    Even poorer New Zealand has a NO ASSET pension so it is cheaper and user friendly.

    Why worry that few million$ earners get it too. That is peanuts to them, not enough for a good vintage champagne.

    Do retired and retiring people really look forward and want 100++ visits to/from Centrelink and be part of 3 million waiting queues and lost calls?

    Does your MP really like being part of the system that allows this indirect abuse of the elderly?

    This abuse is actually sponsored by our government and forced down to Centrelink and borders on a criminal act.

    Why do MPs normally compassionate persons let this Centrelink abuse happen at taxpayers’ expense?

    Some opposition and independent MPs stand to lose their chance at being part of the needed government changes

    We all need to tell our MP and senators every day that these criminal asset tests for a pension must be dropped now.

    DEMAND: NO ASSET TEST FOR A PENSION EVER AGAIN!

    Help yourself and others, today and every day, pass this demand on to all government, opposition and independent MPs and senators who could help us to get a fair deal on pensions
    KSS
    29th Aug 2018
    12:16pm
    Please stop copying and pasting this every day. We get it. You want to remove the asset test and give everyone a pension.

    Please move on.
    MICK
    29th Aug 2018
    1:14pm
    KSS - I received am email from a good mate in the US only a couple of days ago. This fellow is well heeled and does not even want a pension, but has hit pension age and is forced to take it. Never seen a guy so offended and he reckons he is now a "ward of the state".
    The point is that first world countries DO NOT ROB THEIR CITIZENS OF A PENSION. You may not be sympathetic but please go overseas and see other cultures similar to ours. None I know of are being cannibalised by their governments! The only reason we are is better known as WEALTH TRANSFER where you take from the poor and give tax cuts to the top end of town. Come on in Morrison!
    Rae
    29th Aug 2018
    1:55pm
    Yes MICK and all the other OECD countries have universal pensions that don't discriminate and don't make stuff up calling it "deeming".
    MICK
    29th Aug 2018
    4:40pm
    Only in Australia. Only under a coalition government.
    Alexii
    29th Aug 2018
    8:40pm
    You're right on the ball there, Mick.
    Mad as Hell
    30th Aug 2018
    9:26am
    Grey Computing keep this post going until the politicians get it.
    OlderandWiser
    3rd Sep 2018
    2:29pm
    Yes, and until all the ignorant and selfish here get it and support your call.
    Jannie
    29th Aug 2018
    11:21am
    Our government is relying on pokies revenue as our country is in so much debt. I do not trust either the Liberal or Labor parties, lost total confidence in them. Not sure what the answer is but something needs to be done before we become a third world country. As for the voting public most do not understand how the system works, or for that matter why we have to vote. Most cannot even speak English. We are dooomed folks.
    Jannie
    29th Aug 2018
    11:23am
    To prove my point watch the documentary called ka-ching.
    TREBOR
    29th Aug 2018
    11:36am
    The reason for all that Jannie, is that our governments have become far too bloated with all kinds of sweet little earners on the side for mates, via 'commissions', star chambers, boards for this and that which are all more appropriately public service issues, and so forth.

    Governments here started down this path some time around the 1970's, in retaliation to the protests of the Vietnam War and the rising People Power, and the concurrent 'opting out' of the hippies and such.

    All the additional revenue from GST, pokies and such, has done nothing for State governments, but give them the opportunity to extend their power over the ordinary citizen via endless 'social' changes and impositions via legislations and star chambers, while leading us inexorably into the morass of 'less government in "business", privatisation, and thus the destruction of the basic household economy and its ability to keep up with profit mongering, In other words, all that lovely money from those sources did not and does not materially assist the ordinary person - but rather has handed governments the opportunity to impose their own will on the people totally, and refuse to carry out their core responsibilities to those people (roads, power, gas, utilities etc).

    Naturally - all of this has lead to a massive decline in the value of the dollar and its purchasing power, and the endless need for massive rises in incomes, along with the desperate seeking of governments and their mates to keep a lid on those.
    TREBOR
    29th Aug 2018
    11:37am
    Nothing shows more clearly the enormous gulf between 'government' here and those it is meant to serve - the people.
    KSS
    29th Aug 2018
    12:17pm
    "Our government is relying on pokies revenue as our country is in so much debt."

    So then its easy not to give the Government your money ten. Stay away from the pokies and you'll be right!
    TREBOR
    29th Aug 2018
    12:38pm
    Drink booze instead.... oh ... wait a minute.... ummmmm...

    Pokies get $5 - no payee, no playee....
    HarrysOpinion
    29th Aug 2018
    2:48pm
    No state government will relinquish tax on poker machine revenue.
    Did you know that In 1535, King Henry VIII of England, who wore a beard himself, introduced a tax on beards. The tax was a graduated tax, varying with the wearer's social position. His daughter, Elizabeth I of England, reintroduced the beard tax, taxing every beard of more than two weeks' growth, although it was poorly enforced.
    In 1698, Emperor Peter I of Russia instituted a beard tax to bring Russian society in line with Western European models. To enforce the ban on beards, the tsar empowered police to forcibly and publicly shave those who refused to pay the tax. Resistance to going clean shaven was widespread with many believing that it was a religious requirement for a man to wear a beard. The tax levied depended upon the status of the bearded man: Those associated with the Imperial Court, military, or government were charged 60 rubles annually; wealthy merchants were charged 100 rubles per year while other merchants and townsfolk were charged 60 rubles per year; Muscovites were charged 30 rubles per year; and peasants were charged two half-kopeks every time they entered a city.
    Today, in the 21st century, instead of such tax there is GST. Pokies turnover tax and so on.

    Benjamin Franklin said there were only two things certain in life: death and taxes but there are other things that are certain in life like, Rubbish, Pollution. Climate change..
    Knows-a-lot
    29th Aug 2018
    3:41pm
    Jannie, we already are a third-world country! Australia is flooded with immigrants and refugees from third-world countries.
    TREBOR
    29th Aug 2018
    11:28am
    I'll say it again - reverse mortgages with very high compound interest are simply far too expensive. Mick has it right above .. strip the retiree of whatever the government can get ... and what amazes me about all these 'right wingers' who suppo9rt this kind of nonsense is how deeply they are mired into the Stalinist etc approach of zero private property - however like the Leninists, their view is simultaneously that the peasants in the fields have no rights since they are but cattle, and "The People" refers to their own middle class group and upwards only...... (peasants have no need for anything but a few crusts from the company store and a tar paper roof over their head supplied by the company on company land, for which the peasants pay...)

    The People, of course, are entitled to own as much as they can grasp..... amazing.. simply amazing.

    Kissinger had it right when he called Stalin "The Greatest Czar", and he is alive and well in modern 'right wing' Australia....
    Anonymous
    29th Aug 2018
    2:50pm
    Labor inrtroduced it - inevitable after they removed universal pension
    TREBOR
    29th Aug 2018
    3:43pm
    Most such policy thrusts - the kind of 'go along with it or we'll do it for you' approach - are bi-partisan - for the simple reason that government in this nation is not for the people first and foremost.
    Anonymous
    29th Aug 2018
    3:44pm
    Nope - you can't spin this one my friend. It was labor , solely labor's decision
    Knows-a-lot
    29th Aug 2018
    3:46pm
    Labor introduced Medicare, the NDIS, Disability Support pensions, and every other major piece of infrastructure since WW2. Your mates, the Lieberal scum, have done nothing but featherbed the rich.
    MICK
    29th Aug 2018
    4:43pm
    I have to say TREBOR you look like you have pretty well nailed it. Of course the right wing trolls cannot handle the facts and the last 6 years of history so they always smear Labor and Shorten to draw attention away from the obvious.
    TREBOR
    31st Aug 2018
    1:25am
    I am a humble servant of facts.... I read a lot and view a lot, and I draw conclusions..... what that means is that I do NOT automatically adhere to any party line, and rather advocate a NEW party line for the people, of the people and BY the people.

    I suppose that makes me a republican.... (oh, heemie - LEARN the difference between a republican and a Republican - same as the difference between a national socialist and a National Socialist)..... you've a long way to go, LASS.
    Old Man
    29th Aug 2018
    12:19pm
    Last time I checked, Australia is a democratic country which allows its citizens a freedom of choice. My choice is that, under present circumstances, I won't have anything to do with a reverse mortgage and in saying that it doesn't mean that others should follow my choice. The reasons people take up a reverse mortgage are many and varied and the important thing about that is that it is their free choice to do it.

    This discussion has dropped immediately into government bashing when no government member or government department is forcing anyone to sign up for a reverse mortgage. The question at the end of the article is simply "Have you ever considered a reverse mortgage? How thoroughly have you investigated the costs and charges?", nowhere were we asked to critique the government.
    TREBOR
    29th Aug 2018
    12:43pm
    Ummm... yeeessss... the argument with governments of various hues seems to be about which 'side' (of The Tag Team) is actively herding retirees into asset-removing ventures, via reductions in sustenance money for pensioners and part-pensioners etc.

    I don't see their Opposition doing anything different - I've long said that Labrador is way too busy pushing forward its great social revolution and equalising everybody on Earth by reducing the incomes of some and promoting those of others and giving rights around like confetti...

    Just like their mates in the LNP, they see pensioners as a burden etc... and are quietly buying into the nonsense that since the government is obliged to pay pensions in return for a lifetime of tax contribution, pensioners should be reduced to zero assets before getting a pension.

    Like water dripping on stone... one little bit at a time....
    Old Man
    29th Aug 2018
    12:58pm
    Very cynical Bob. I was fortunate in that my first employment allowed me to join a super scheme and the employer contributed $ for $ (back then it was £ for £) but I was in a minority. Keating introduced compulsory super for all about 1992 and now all Australians will benefit providing the funds are left until retirement age. We are yet to see the full benefits of Keating's scheme but a side effect has to be, and was always planned to be, a savings on government coffers in paying out age pensions.
    MICK
    29th Aug 2018
    1:21pm
    OM - are you serious????

    Democracy?

    Is that why the current government put forward laws to imprison people who speak against the government or the interests of Australia? Is that democracy?

    Is that why the current government wants to track people on their phones? Is that democracy?

    Is that why the current government sought to silence GetUp but not Alan Jones, Andrew Bolt, Murdoch media, 7 News or 9 News? And lets not forget wanting to sell the ABC and cutting, installing an ex Murdoch CEO or repeatedly cutting its funding? Is that democracy?

    Your post is all but farcical as you play the right wing violin whilst ignoring the clear and well understood undemocratic behaviour from the current government. And you reckon I am one eyed?
    TREBOR
    29th Aug 2018
    3:48pm
    I've had several super schemes, OM - including the luxurious commonwealth one...

    I've been saying for along time, ever since that nitwit Hockey started ranting about pensions being a dreadful loss to the economy - that super had only been in place for all for half of its working lifetime, and in most cases had yet to bear fruit - let alone the full fruit of a fifty year commitment. When the scheme had only run 25 years instead of that 50, how in hell would these idiots expect super to begin effectively supplanting at last a significant portion of Pension? In that first 25 years, most people who then got to retirement didn't have a massive nest egg... but allowed to run for 50 years without terror striking into the heart of the Hockey mind over the huge cost of Pensions, then it would be making a difference.

    It may not replace pension entirely - but all this raving about the dire future cost of pensions was only gong to be around for 25 years before everyone getting to retirement would have a significant nest egg, thus reducing the pressure on pensions.

    You simply cannot teach lame-brains to think past their immediate ideology and their desperate attempts to con the public into a false belief about current finances - which is one clear reason I am so cynical about government these days.
    MICK
    29th Aug 2018
    4:46pm
    Of course TREBOR. What you may be missing is attempts to take away what EVERY first world country gives its citizens. What never seems to be mentioned is exactly what you said: people contribute over 50 years and compounding takes care of the rest.
    The real issue is a deadbeat government owned and controlled by and for the rich plundering average Australians. Tax cuts anyone?????
    Alexii
    29th Aug 2018
    8:43pm
    Mick, i have to sy it again: you're right on the ball!
    TREBOR
    31st Aug 2018
    1:27am
    I know that, Mick, and you are 100% correct.
    OlderandWiser
    3rd Sep 2018
    2:34pm
    Freedom of choice, Old Man? That's a novel idea. They bankrupt you with abusive policies and then claim you have the CHOICE not to reverse mortgage to survive. That's NOTHING LIKE FREEDOM.
    Rae
    29th Aug 2018
    1:51pm
    Unless Australians want to see their elderly dying in droves in the streets or filling the hospital beds then the Governments had best get cracking building nursing homes for those with no assets left. There won't be any sales of homes and $600 000 bonds once people reverse mortgage for a couple of decades.
    Rae
    29th Aug 2018
    2:04pm
    I say this because an increasing reason for homelessness amongst the elderly in America is debt burdens they can't pay often for reverse mortgages taken out for health care costs.

    Better to just stay home and save your money as you can only really rely on yourself and your savings. You never know when you may need funds for medical treatment or repairs to the house or car or new appliances and if you have saved some money by not falling into the spending trap then you don't need a reverse mortgage.

    I wouldn't take one out as negative compounding is extremely dangerous. Imagine if interest rates hit 17% again and you had a negative mortgage at that rate of interest.
    TREBOR
    29th Aug 2018
    3:54pm
    I had a chuckle at that prospect, Rae -the Guv having to build old-age gulags for the indigent.... (please do not distress inmates by discussing the outside world) ...

    On the other hand, that issue of the countless old ladies living alone would be ameliorated somewhat if there was a more organised and affordable retirement village concept around... just need to remove the corporate vultures and parasites from the equation.

    If interest rates went back to 17%, the reverse mortgage rate would be about 20% plus... totally unsustainable.

    Thinking about it, that kind of usury and loan sharking could only operate in an environment of low interest rates, since too high a rate is so blatantly unsustainable.

    Might be something in that re government policy.

    29th Aug 2018
    2:51pm
    When labor deprived millions of retirees of the pension by introducing the asset test, surely they must have known that the result would be the market introducng products such as reverse mortgages for those who labor robbed
    Knows-a-lot
    29th Aug 2018
    3:50pm
    Far-Right Lieberal Party trolling. It's your mates who have buggered this country.
    MICK
    29th Aug 2018
    4:52pm
    Its the Turnbull government which reduced eligibility hurdles which many Australians trying to provide for their own retirements could not meet. Realistic benchmarks were fine and you can distort all you like olbaid/satan but it is what it is. What do they call the devil................."the great deceiver". Keep it up.
    Anonymous
    29th Aug 2018
    5:01pm
    Spin it any way you like Mick. Labor took away from Australians what every other first world country provides its citizens - UNIVERSAL PENSION
    MICK
    29th Aug 2018
    5:42pm
    Spin is your middle name olbaid. Read the post below from Concerned.

    You are a liar! Intentional! Labor apparently has nothing to do with introducing reverse mortgages and IT IS THE COALITION WHICH PUSHED THE PRODUCT TO AUSTRALIANS SO THAT THEY CAN SAIL ONTO THE ROCKS. Talk to your mate Morrison. He was the delivery boy.
    OlderandWiser
    3rd Sep 2018
    2:31pm
    Olbaid, Labor did introduce the assets test, and the Howard Government adjusted it to be far more reasonable, but the stinking inept current LNP did the majority of the damage but reducing the threshold at a time when returns were at an all-time low.
    Anonymous
    3rd Sep 2018
    2:41pm
    You
    just dont get it do you Rainey
    If Labor hadnt introduced the asset test, there would be nothing to argue about.
    Cant you focus on the ROOT cause of the problem ?????

    DUHHHH
    OlderandWiser
    3rd Sep 2018
    5:07pm
    I think it's you who doesn't get it, olbaid. Who cares whether or not there's something to argue about? I care what's good for the nation - and the assets test isn't, no matter how introduced it or who changed it. THAT is the root cause of our economic problem. Inept politicians with no vision making idiotic decisions with no sensible consideration of the longer term consequences. DUHHH!
    Knows-a-lot
    29th Aug 2018
    3:34pm
    Anything from the financial sector is certain to rip you off. And remember that the current incompetent Lieberal government vigorously resisted the Royal Commission into the banks.
    Concerned
    29th Aug 2018
    3:50pm
    To old man. Reverse mortgages were not introduced by a labor government but in fact were first introduced into Australia by St George bank in the 1990s. The only intervention by Labor was to try, in 2012, to introduce some checks and balances to PROTECT people. It was the Howard era that pushed the concept and of course the present government who,rather then actually looking at the reality of older people and their needs, suggest that pension age should be raised and that pensions are a privilage and not a necessity. That wish to remove the last piece of security -the family home -rather then actually budget for the whole population. Your often written comments are biased and often incorrect.
    MICK
    29th Aug 2018
    4:53pm
    Thank you for informing us all Concerned. I have noticed over the years that the government trolls lie constantly to try and turn the blame around. Well done for catching them out.
    Anonymous
    29th Aug 2018
    5:02pm
    Reverse mortgage is the consequence of labor abolishing universal pension. Where the government fails, the market steps in
    MICK
    29th Aug 2018
    5:43pm
    Ok olbaid....PROVE IT. I'm pretty sick of you lying.
    TREBOR
    31st Aug 2018
    1:30am
    Successive governments of either side have rorted the Pensions fund and robbed retirees blind .... I draw no distinction between the two.
    TREBOR
    31st Aug 2018
    9:39am
    Wouldn't couch one with a ten foot pole - Vladimir Koslowsky - tallest Pole you ever saw... then there was his sister Validimira - Johannesburg Olympics 2079 .. basketball team.... unbeaten..
    On the Ball
    12th Dec 2018
    2:23pm
    Kaz wrote: "If you do it to help your adult children, the debt is theirs when you die, so don’t panic."

    How so?

    If you read the article it says "Under legal protections in place since 2012, borrowers can never owe the bank more than the value of their property"

    So no, the kids dont get their parents' house, as its value was used up in keeping the parents' living standards. But they also dont inherit a debt.
    Any other way would be double dipping.
    Oh, and which Federal Government was in power in 2012?


    Join YOURLifeChoices, it’s free

    • Receive our daily enewsletter
    • Enter competitions
    • Comment on articles