Kieren Dell
The Senior Australians Equity Release Association of Lenders (Sequal) has called on financial planners to review client reverse mortgage loans for their suitability in the current environment of rising interest rates.
“After what the Reserve Bank itself has said on interest rates, it is incumbent on financial planners to go back to their clients and review their reverse mortgages,” according to Sequal executive director Kieran Dell.
“The fact is, reverse mortgages are not a one-off transaction that can be put in place and then just left to run, especially not during a period of rising interest rates,” he said, speaking at the launch of new Sequal research last week.
“There needs to be a continual review of client reverse mortgages in this period of change, in exactly the same way as when a planner is dealing with a client’s investment portfolio,” he said,
Dell said he “suspected that more and more clients would be wondering what protections and safeguards could be put in place for their loans as we move into a higher rate environment”.
“There are lots of different strategies that planners can use to help mitigate the affects of higher interest rates both for clients in variable and fixed term rate products,” he said.
Refinancing from a variable or fixed term reverse mortgage to a fixed rate for life reverse mortgage is one solution for clients concerned about rising interest rates, said Craig Swan, spokesman for equity release sector association Fortus.
“Fixed term rates themselves are part of the problem when for example a client comes out of a fixed term rate, say of three years, to suddenly find that the rate has gone up.”
Also a consultant for brokers Seniors Equity Direct, Swan said it’s also a “good idea now for planners to considerer restructuring either variable or partly variable rate reverse mortgage loans of clients”.
“They should consider restructuring the component of the loan facility they have already used to a fix-for-life rate, and leave the remainder as a variable rate component.”
