Retirement
Why are Australians rejecting popular loan options?
Reverse mortgages are growing in popularity overseas, but the take-up is low among Australians, and the regulators are circling.

Why are Australians rejecting popular loan options?
Reverse mortgages are growing in popularity overseas, but the take-up is low among Australians, and the regulators are circling.

Many Australian retirees are cash-poor but asset-rich, meaning they have substantial equity in their homes, but limited cash in the bank.
Despite a record-high property market since the GFC and historically low interest rates, retirees are still reluctant to release the equity in their homes, according to the University of New South Wales (UNSW).
“While economic theory predicts that households would demand reverse mortgages to improve retirement funding, the take-up rates for reverse mortgages are low in Australia and internationally,” said senior research fellow at UNSW, Dr Katja Hanewald.
What is a reverse mortgage?
A reverse mortgage allows home owners to borrow money using the equity in their homes, including their principal place of residence, as security.
Home owners aren’t required to make repayments while they still live in their home. Interest is still charged as normal, but it can compound and be added to the outstanding loan balance.
Reverse mortgages are more popular with older home owners, because the loan must be repaid in full when the home is sold or moved out of, typically triggered when the home owner dies or moves into aged care.
Popularity overseas
According to ASIC, consumer demand for mortgages has gradually risen since the 2008 GFC, but most Australian consumers still have negative perceptions.
“A common view amongst retirees – and even many finance brokers and lenders – tends to be that equity release products take advantage of vulnerable elderly people, or that they are often used by family members to do so,” ASIC said in its 2018 review of reverse mortgage lending in Australia.
While fewer investors have taken up the opportunity to release the equity in their home domestically, internationally it has been used as a popular means of funding retirement.
Dr Joshua Funder, CEO and founder of Household Capital, said: “Overseas markets have been expanding rapidly to provide access to home equity to fund retirement.”
Scepticism builds
The corporate regulator has flagged the risk of elder abuse with reverse mortgage structures.
In a 2018 report, ASIC found that borrowers were on average 75 years or older when they took out a reverse mortgage, and the corporate regulator’s loan file identified 15 loan applications where a lender could have detected signs of abuse.
Signs included money being transferred to a non-borrower, the involvement of children in the application, file notes indicating abuse by a sibling of the borrower.
This email address is being protected from spambots. You need JavaScript enabled to view it.
About the author

About the author


Retirement Planning
Retirement time bomb requires complex thinking
The majority of Australia’s super assets now sit in the hands of retirees and pre-retirees, but many require more nuanced investment strategies to achieve the lifestyle they want in retirement, a ne...Read more

Retirement Planning
Why some Millennials are struggling to save for retirement
Millennials are struggling to save for retirement as they face challenges that are different from other generations. What are these reasons? ...Read more

Retirement Planning
Retirement Income Review cornerstone ‘not for everyone’
Despite being the cornerstone of the Retirement Income Review, an expert has highlighted that downsizing and withdrawing equity from a property might not be the solution for all older Australians. ...Read more

Retirement Planning
Effective tips that can help Millennials retire faster
Millennials have changed the cultural and societal landscapes of the world. This is unsurprising, given the fact that they are the best educated and most diverse generation in history. ...Read more

Retirement Planning
What you need to know to get ahead financially
Australians looking to get ahead are being advised to analyse their financial situation, set financial goals and reduce debt whenever possible. ...Read more

Retirement Planning
How to adjust your wealth strategy during COVID
Investors are being urged to be conservative about spending, reduce debt and be careful of assets that are supported by government spending, as they look to adjust their wealth strategies during the f...Read more

Retirement Planning
Should older Australians downsize their property?
Older Australians face the dilemma of not being confident about their retirement outcomes, but are among the wealthiest retirees in the world due to a large proportion of their wealth being tied up i...Read more

Retirement Planning
Self-funded retirees ‘hung out to dry’ by 2020 budget
The Association of Independent Retirees has slammed last night’s federal budget release, accusing the government of overlooking older Australians in its post-COVID-19 recovery plans. ...Read more

Retirement Planning
Retirement time bomb requires complex thinking
The majority of Australia’s super assets now sit in the hands of retirees and pre-retirees, but many require more nuanced investment strategies to achieve the lifestyle they want in retirement, a ne...Read more

Retirement Planning
Why some Millennials are struggling to save for retirement
Millennials are struggling to save for retirement as they face challenges that are different from other generations. What are these reasons? ...Read more

Retirement Planning
Retirement Income Review cornerstone ‘not for everyone’
Despite being the cornerstone of the Retirement Income Review, an expert has highlighted that downsizing and withdrawing equity from a property might not be the solution for all older Australians. ...Read more

Retirement Planning
Effective tips that can help Millennials retire faster
Millennials have changed the cultural and societal landscapes of the world. This is unsurprising, given the fact that they are the best educated and most diverse generation in history. ...Read more

Retirement Planning
What you need to know to get ahead financially
Australians looking to get ahead are being advised to analyse their financial situation, set financial goals and reduce debt whenever possible. ...Read more

Retirement Planning
How to adjust your wealth strategy during COVID
Investors are being urged to be conservative about spending, reduce debt and be careful of assets that are supported by government spending, as they look to adjust their wealth strategies during the f...Read more

Retirement Planning
Should older Australians downsize their property?
Older Australians face the dilemma of not being confident about their retirement outcomes, but are among the wealthiest retirees in the world due to a large proportion of their wealth being tied up i...Read more

Retirement Planning
Self-funded retirees ‘hung out to dry’ by 2020 budget
The Association of Independent Retirees has slammed last night’s federal budget release, accusing the government of overlooking older Australians in its post-COVID-19 recovery plans. ...Read more