ASIC to check on reverse mortgage boom market
The increasing move by older Australian home owners to use reverse mortgages has led to the Australian Securities and Investments Commission (ASIC) carrying out a research project to examine the impact of these comparatively new schemes on consumers.
ASIC’s executive director of consumer protection, Greg Tanzer, said there was at present inadequate disclosure of costs and risks associated with these products and the Uniform Consumer Credit Code did not mandate disclosure of the general risks associated with reverse mortgages.
Reverse mortgages enable home owners, usually retirees, without an ongoing income stream to borrow against the equity in their homes. Instead of the borrower having to make regular repayments the loan is expected to be repaid following the sale of the house.
Concern has centred on some borrowers being left owing more than the value of their homes where property values have fallen and others caught out by mortgage brokers inflating loan sizes to boost their own commissions and also by unclear or unfair clauses in the mortgage contract.
A recent study by Trowbridge Deloitte for the Senior Australian Equity Release Association of Lenders showed that the average age of reverse mortgagors was just under 75 and that the reverse mortgage market had increased by 20% to $1.8 billion in the first half of 2007.
