Household Capital welcomes review of Government’s Pension Loans Scheme, calls for greater protection of seniors
Josh Funder
Household Capital, an independent, specialist retirement funding provider has welcomed the federal government’s review of the rate it charges for the reverse mortgages in its Pension Loan Scheme (PLS), its expanded home equity funding program.
Dr Joshua Funder, Chief Executive at Household Capital, says the review is an endorsement by the government of the importance of home equity as part of the third pillar of retirement funding, even while the big banks have stepped away. “Australians know that the family home provides retirement lifestyle, wellbeing housing and funding. The federal government must support the retirement funding sector to deliver better outcomes in retirement,” said Dr Funder.
Government review of its PLS interest rate is urgently needed
“Australians deserve efficient, affordable access to their home equity to fund their retirement. For many retirees, the PLS is a start, albeit with limited flexibility. We welcome the Treasurer’s willingness to examine the current rate of 5.25% p.a and move towards a lower rate such as that offered by private sector providers such as Household Capital’s own rate of 5.15%. It’s a pleasing response to the advocacy of National Seniors.
“We call on the Government to support retirees with this review by passing on improved home equity interest rates, as a lower rate of compound interest can have a significant impact in preserving more home equity throughout the term of their loan” said Dr Funder.
Household Capital’s innovative approach to wholesale funding means it can offer a rate significantly lower than its competitors. With the PLS under review, Household Capital’s rate remains the lowest on the market at 5.15% p.a after passing on the RBA’s October rate cut in full.
Government must do more to protect seniors
Although a reduction in the interest rate payable on the PLS may benefit retirees, Dr Funder cautioned that applicants do not receive the full protection of ASIC responsible lending:
“While PLS customers receive a Centrelink government loan, they are currently exempt from responsible lending criteria set out by ASIC. Additionally, as ASIC noted in its 2018 review of reverse mortgages, all PLS customers should be thoroughly vetted for potential elder abuse. We hope the Treasurer will take this into consideration in the review,” said Dr Funder.
Retirees deserve innovative retirement funding solutions
Household Capital provides Australian homeowners with such much needed, flexible access to capital. This may include being used for income, improved housing or family expenses, contingency funding for unexpected expenses or funding the transition to aged care.
“Improved retirement income is crucial, but it’s not the only funding that retirees need for 20 years or more of retirement. Nor does it cover all retirees’ capital needs, which is where private providers come in. Household Capital provides Australian homeowners flexible access to retirement funding in income and capital; this may include a regular income stream, improved housing, contingency funding for unexpected expenses or funding the transition to aged care.”
Retirees are doing it tough – and banks have stepped away
Dr Funder says that many retirees are still paying off a mortgage at higher rates than new loan applicants.
“The banks are not looking after their retiree customers by failing to pass on rate cuts to existing loans. it means loyal retirees still paying off their forward mortgage don’t get the low rates that are offered by banks to bring new customers in the door.
“Home equity can be used by retirees to refinance their mortgage and free up retirement funding. Because there are consumer protection laws governing reverse mortgages, there is no risk of default or having the bank take the family home,” he explained.
“We provide retirees with personalised service, flexibility and choice to cover the fact that there is no ‘average retiree’. Like the Centrelink PLS, Household Capital wants to meet the retirement funding needs of senior Australians,” concluded Dr Funder.
