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Big banks are targeting the
equity in the homes of the elderly by offering loans against the value of
their house - to the chagrin of consumer groups and those who value their
future inheritance. The Commonwealth Bank announced
yesterday the establishment of a reverse mortgage product which in effect
swaps the retained value in a home for a loan. St George released a similar
product last December. The loans are aimed at
maintaining a lifestyle not available for most pensioners and
superannuants. Rising home prices have left many
of the elderly asset-rich but income poor, according to Commonwealth Bank
executive general manager, mortgages and investments, Geoff Austin. But he added that mortgaging the
home would reduce the amount available to leave as an inheritance. The bank said it had commissioned
a survey that found people under 65 were more concerned with securing a
better lifestyle for their parents than getting an inheritance. The Commonwealth said there would
a limit on borrowing but that limit is unspecified. There is no requirement to meet
regular loan repayments or fees but a 1 per cent margin above the variable
Commonwealth's Residential Equity Rate will be charged - and built into
the outstanding principle of the loan. But state president of the
Combined Pensioners and Superannuants Association, Morrie Mifsud, said
that could lead to the equity in a home being quickly eroded. "One problem is that there
is nothing to leave after a person dies," Mr Mifsud said. "But the other is that if something happens in their life and they decide they want to move to a retirement home, there often isn't enough value in the house."
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© 2002 Global Action on Aging |
