The Federal Government has moved to tighten the rules around reverse mortgages, asking older Australians and other interested stakeholders to comment on draft legislation which would impose statutory protection against negative equity and tougher disclosure requirements.
The Assistant Treasurer and Minister for Financial Services, Bill Shorten, described reverse mortgages as being different to other credit products and therefore requiring laws that took account of their unique characteristics.
“With these new measures, older Australians can have greater confidence when using these products and will be able to make better choices,” he said.
As well as imposing statutory protection and greater disclosure, the new legislation also requires lenders to follow a series of steps before acting on a default.
Shorten outlined the risks inherent in reverse mortgages as being interest rate risk, property value risk and longevity risk.
He signalled the Government would also be acting to increase protections around home reversion schemes.
