Pension Loans up for review
Federal Treasurer Josh Frydenberg has launched a review of the Government's reverse mortgage scheme.
The current 5.25 per cent interest rate for reverse mortgages under the Government's Pension Loans Scheme has remained the same despite three official cash rate cuts this year.
The Government says it wants the scheme to reflect Reserve Bank interest rates, in the face of ‘gouging’ claims from retirees.
The Pension Loans Scheme allows retirees to supplement their retirement income by drawing down on equity in their home.
Retiree groups say the Government has a double standard - holding the reverse mortgage rate at 5.25 per cent since 1987 while slamming banks for not passing on official rate cuts.
National Seniors Australia chief advocate Ian Henschke says pensioners are indeed being gouged.
“If you're attacking the banks, you've got to do something about your own house and get it in order. They (the Government) are balancing the budget on the backs of pensioners and retirees,” Mr Henschke told the ABC.
“I think it's pretty clear there's double standard here. The Government is there supposedly to help pensioners, not make money out of them.”
The review is expected to lead to a small rate reduction for 1,100 Australians who use the scheme to unlock the equity in their homes.
Recent Reserve Bank rate cuts will be part of the review, but Mr Frydenberg says the Government's reverse mortgage rate is already lower than deals offered in the private sector.
“The interest rates for reverse mortgages are above standard mortgage rates reflecting their higher risk,” Mr Frydenberg said in a statement.
“The Government continually monitors the appropriateness of the interest rate for the Pension Loan Scheme to ensure the rates are reflective of current market conditions.”
The Government called on the Australian Competition and Consumer Commission to investigate mortgage pricing after banks held back part of the October Reserve Bank rate cut.