Independent retirement funding provider Household Capital has partnered with ME Bank to establish a $100 million wholesale debt facility.
The loans will be offered to retirees who can use the funds to balance their savings, grow assets or source a sustainable income from their investments.
Household Capital managing director Josh Funder said the interest rate was the lowest currently available to retirees needing to access their home equity.
“Traditional bank reverse mortgages charged around 6.4 per cent. Since the banks withdrew from providing access to home equity for Australian retirees, many remaining providers have increased their rates even higher,” Funder said.
“Working with ME Bank to deliver more efficient and responsible access to home equity, we are able to provide a rate of 5.9 per cent.”
According to Household Capital, the reverse mortgage market in Australia had remained static at about 35,000 outstanding loans and up to a $3.5 billion portfolio for the past decade before entering a decline associated with the withdrawal of bank providers.
Despite this shift, Household Capital chair Nick Sherry said the market to provide retirement incomes was still untapped.
“The banks have pulled out, however, nearly $1 trillion of home equity savings owned by retirees remain potentially available, yet largely inaccessible, to support improved retirement incomes,” Sherry said.
ME Bank, which is owned by 26 industry superannuation funds, holds a minority equity stake in Household Capital, which launched its home equity release product in March 2019.
