Household Capital offers lowest rate reverse mortgage in Australia

Josh Funder

Josh Funder

Household Capital, an independent, specialist retirement funding provider, yesterday announced it will further reduce its interest rate, passing on today’s RBA rate cut in full. Household Capital has reduced its interest rate in line with each of the three RBA rates cut this year.

Lowest rate for home equity access

Household Capital’s innovative approach to wholesale funding means it can offer a rate significantly lower than its competitors, including the government’s Centrelink Pension Loans Scheme (PLS), which is set at 5.25% p.a. Household Capital’s rate will now be 5.15% p.a.

Chief Executive Officer Dr Joshua Funder said: “Being able to offer the lowest possible rate to retirees is important; a lower rate of compounded interest over time means our clients will benefit from preserving more home equity throughout the lifetime of their loan.”

“Our rate cut ensures Household Capital offers the lowest cost access to home equity.”

Limitations of the Centrelink Pension Loans Scheme

The revamped PLS, relaunched on 1 July 2019, is a reverse mortgage type product that’s administered by Centrelink and provides for an enhanced income stream. It does not, however, provide for all retirement funding needs.

“Improved retirement income is important but does not address retirees’ capital needs; you can’t always cover major medical expenses, or replace a leaky room, or appropriately modify a home from the pension,” said Dr Funder.

“Household Capital provides Australian homeowners flexible access to capital; this may include a regular income stream, improved housing, contingency funding for unexpected expenses or funding the transition to aged care.”

Mortgage stress in retirement

Although an interest rate cut might help the hundreds of retirees who are still paying a mortgage, it’s unlikely to alleviate the financial stress being experienced by so many.

The recent report by Australian Housing and Urban Research Institute (AHURI) found more older Australians are finding it difficult to pay off their mortgage debt before they retire; the average mortgage debt among older Australians has blown out by 600 percent since the late 1980s.

“Keeping up with mortgage repayments can really eat into retirement funding; most retirees aren’t on the low introductory rates you see advertised, so they’re really doing it tough,” said Dr Funder.

“Refinancing a forward mortgage with home equity not only frees up their retirement funding, the consumer protections governing reverse mortgages removes the risk of default, the risk of the bank taking the family home.”

Low rates are not always good news for retirees

For those retirees reliant on interest income to fund their retirement, lower rates are another blow. Many risk averse retirees are not prepared to invest in higher yielding assets so are feeling the pinch.

Household Capital provides Australian homeowners access to additional retirement funds by using a low interest rate loan to transfer a portion of the value of their homes to meet a range of long-term needs. These may include income, housing, contingency funding and aged care.

“We can help older Australians by providing responsible access to their home equity to improve their retirement funding,” said Dr Funder.

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