ASB to offer controversial reverse mortgages

ASB has announced it will be the first major New Zealand bank to offer asset rich but cash poor customers reverse equity mortgages.

Reverse equity mortgages have proved controversial in the past, particularly among borrowers concerned about putting debt back into houses they had hoped to hand on to their heirs unencumbered.

However, many have predicted reverse equity mortgages will become more popular as an ageing population sitting on big equity gains from the property boom seek to free up cash to pay for medical bills, holidays and living expenses in extended retirements.

Despite that, some borrowers have worried that lengthening retirements and survivability allied to the power of compounding interest could see equity eroded before any inheritance can be passed on.

ASB said the time was right for a major bank to offer reverse mortgages, which previously have only been offered by specialist lenders at relatively high interest rates.

"These loans are specifically suited to people older than 65 years of age, and enable asset rich but cash poor home owners to borrow money against part of the equity they have in their home," ASB said.

"While borrowers can repay all or part of the loan at anytime, normally the loan and outstanding interest is recovered by the bank when the home owner sells the property, or from their estate," it said.

"We are introducing HomePlus in response to demand from our senior customers," said ASB's CEO of Customers, Markets and Products, Catherine McGrath.

To read the full NZ Herald article, click here

Posted: 26 Aug 2010

News articles