Pensioner group calls for lower reverse mortgage rates

By Darren Moffatt

February 3

7 comments


National Seniors Australia (NSA) has requested a review of the Pension Loans Scheme (PLS), citing the high-interest rate is too high and not in sync with the record low official cash rates. 

NSA is a lobbying group that represents more than 130,000 retirees in Australia. 

In the group’s pre-submission, it asked the Treasury to reduce the interest charged on the PLS, which is a reverse mortgage loan sponsored by the federal government. 

[ RELATED POST: Pension Loans Scheme: Government Reverse Mortgage to be Expanded ]

According to NSA, the current PLS rate of 4.5% is too high for pensioners who need to tap into their home equity to fund their retirement. 

“Unfortunately, while the PLS is a good idea, it has been poorly promoted and has an unattractive interest rate,” NSA said. “This rate is especially off putting, given record low interest rates.” 

What is the Pension Loans Scheme? 

The PLS is a home equity program backed by the Australian government that allows pensioners to unlock a portion of their real estate property to boost their retirement income. 

This ‘government reverse mortgage’ is similar to the home equity loan offered by Seniors First because it also allows access to home equity to help “asset-rich, cash-poor” retirees. 

But many retirees choose private reverse mortgages because the PLS don’t pay lump sum, and you may only use the proceeds as income stream bundled to your pension. 

Home Care Loans Scheme

On top of slashed rates, NSA is also calling for the inclusion of the new “Home Care Loans Scheme” in the 2021 budget. 

The new scheme will allow pensioners to use the loan proceeds to pay for aged care at a cheaper interest rate compared to the current scheme. 

[ RELATED POST: ‘Government Reverse Mortgage’ (PLS) vs Home Equity Release Lenders

This suggestion is commendable because many retirees are using reverse mortgages to fund age care packages. 

In the current PLS scheme, seniors may not use the proceeds for important aged care costs such as the Refundable Accommodation Deposit (RAD). 

RAD is an upfront payment to the residential aged care home that ranges between $300,000 and $400,000. 

Growing Demand for Reverse Mortgages 

The call from the NSA suggests that there is a growing demand for financing options to help older Australians live a comfortable retirement. 

And with the effects of the COVID-19 to both global and domestic economy, many pensioners are looking into available options. 

If you have any questions about reverse mortgages, please feel free to leave a comment below or call Seniors First on 1300 745 745. 

Regards, 

Darren

  • Hi Mia, I have same question as above. My wife and I are both 70, very healthy and own our own home now valuated at 1.3 million. It was only 750K when we got an Equity Unlock from a major bank (not St George). It was for 150K of which we have unlocked 90K over the years. Question: Would you or anyone else take over this mortgage in the way banks take over existing credit card amounts? Advantages to you would be new business, to us, higher top amount and perhaps better interest rate.

  • Hello I am 73 healthy woman has reverse mortgage $130.000 with St George , they don’t have this loan any more so I can’t top up the loan , my house worth $850000 now , so how much can’t I get the loan pay back to St George and top up $30000 more ?? Could also let me know what amount to charge monthly ,if your interest rate lower than my bank . Thank you

    • Hi Peter,

      Many thanks for your enquiry into Seniors First.

      We would love to speak with you further in regards to your enquiry.

      Please call us today on 1800 745 745 so we can put you in touch with the correct state manager.

      Thank you so much!

      Kind regards,
      The Seniors First Team.

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