Mary Green* is a 75-year-old retiree who has fought ill health for much of her life.
Widowed at age 56, her medical condition meant she could work for only two days a week while supporting three children. There was little opportunity to build up a savings fund. Like many others, Green has found NZ Super payments don’t come close to covering all her needs. So she’s taken out a reverse mortgage, using equity in her Northland home to pay for a more comfortable retirement.
She’s not using the money to fund cruises or install a spa pool: it goes to rates, power, health insurance. And that makes perfect sense to her son, Chris*, a 45-year-old accountant.
“Like many baby boomers, Mum didn’t have the opportunity to save for retirement,” he says. “It’s very simple. It’s a mathematical equation; there’s no emotion involved in it. The pension doesn’t house and feed you; it’s simple.”
Reverse mortgages have an official name, Home Equity Release (HER), and date back many decades. The idea is simple. A loan is taken out against a high-value house, the borrower doesn’t pay interest, which accumulates against the principal, and the whole lot is paid back when the borrower dies or sells the property.
They are offered by a limited number of NZ financial institutions. The sector has grown by $300 million in the past three years, though at $1.06 billion in funds lent (as of November, 2023), it’s a tiny, 0.41 % drop in the total mortgage pool for owner-occupied homes of $259.3 billion and accounts for just .006% of our total housing assets.
The big four banks don’t offer them as a product and it would appear many older people don’t use them, either, despite the need to augment an inadequate pension and the two-decade property boom giving them more headroom.
The stunning rise in New Zealand property prices over the past two decades – only slightly mitigated by the recent correction – would seem to make
