PHOTO: 123RF With term deposit rates low, more people are opting to borrow against their homes, Heartland says.
Low interest rates and high house prices are prompting more retirees to take out a reverse mortgage against their homes.
Reverse mortgages – primarily offered in New Zealand by Heartland Bank – allow people to borrow a sum of money against their houses. They do not have to make any repayments until the house is sold. But interest accrues and compounds while the loan is not being repaid, so the amount that finally falls due can be a lot bigger than what was borrowed.
Heartland head of retail Andrew Ford said his organisation had seen a big jump in inquiries since interest rates fell. The average six-month term deposit rate fell from 3.6 per cent a year in December 2018 to 2.63 per cent last December.
In the half-year ended December 2019, the Heartland Bank reverse mortgage business increased 10 per cent to $536 million in lending. Inquiries were up 39 per cent in the last quarter of last year compared to the year before.
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