THE Federal Government is moving to introduce stricter regulation of reverse mortgages, an increasingly popular financial product marketed to older homeowners, because of fears that people could be exploited.
Announcing plans for national regulation of a range of financial services, the Minister for Corporate Law, Nick Sherry said he was concerned about the people taking out reverse mortgages without understanding the implications.
Reverse mortgages typically allow over-60s whose homes are unencumbered to borrow substantial amounts against the value of their property.
Repayments are deferred until they move into retirement accommodation or die, when principal and interest is typically paid out from the sale of the house.
Senator Sherry said the Australian Securities and Investments Commission had identified areas of abuse in the distribution and sale of the mortgages.
But while the products were regulated federally, mortgage brokers marketed the loans were regulated under state legislation.
Industry figures show the number of reverse mortgages grew from 15,000 in 2005 to more than 30,000 last year.
Mark DavisRead more