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ISCOVER
Staff Reporter
The reverse mortgage industry is set for a shake up as the federal government looks to ban contracts that allow negative equity to build up on a mortgage.
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The government is also expected to increase the information disclosure requirements on reverse mortgages to ensure people know what they are getting into.
Furthermore, the Australian Prudential Regulation Authority is demanding reverse mortgage lenders hold greater levels of capital, compared with traditional mortgages, to cover any defaults.
These robust requirements will ultimately make the reverse mortgage industry less profitable and could force more participants out of the industry.
Earlier this year, several major reverse mortgage lenders withdrew themselves from the market.
However, industry lobby group SEQUAL denied the new laws would bring an end to the reverse mortgage industry and said any downturn in demand for these types of loans has been natural.
