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New week, new branding? Yes, that’s right, after 10 years it seemed an appropriate time to refresh our branding and we’re thrilled with the result.
This week, Macquarie Bank has cut its one to three year fixed rate mortgages by up to 0.16 percentage points, positioning itself among the most competitive lenders in the market.
The move underscores Macquarie’s continued dominance in mortgage lending, with its loan book growing 14% over the year to November 2024, largely driven by broker channels.
This proactive rate reduction comes ahead of the Reserve Bank of Australia’s anticipated cash rate decision on 18 February, where a potential rate cut could mark the first in over four years.
In this week’s newsletter, we take a look at reverse mortgages which continue to generate interest amongst older Australians given concerns about increased cost of living in retirement.
A reverse mortgage is a financial product that allows older Australians, typically aged 60 and above, to access the equity in their home as a lump sum, regular income stream, or line of credit.
Unlike a traditional loan, borrowers are not required to make regular repayments. Instead, the loan, along with accrued interest, is repaid when the homeowner sells the property, moves into long-term care, or passes away.
Benefits of Reverse Mortgages
Reverse mortgages can be beneficial for older Australians who are “asset-rich but cash-poor.” They provide a way to access much-needed funds for living expenses, medical costs, home improvements, or lifestyle enhancements without selling the family home. For retirees without sufficient superannuation or savings, a reverse mortgage can offer financial flexibility and peace of mind while allowing them to stay in their home.
Risks and Considerations
While reverse mortgages offer advantages, they also come with significant risks. Interest compounds over time, meaning the debt can grow quickly, potentially reducing the equity left in the home for heirs. If the property value does not increase as expected, the loan could consume a large portion of the home’s value. Additionally, borrowers may face restrictions on moving or selling the property due to loan conditions.
Another risk is longevity. If the borrower lives longer than expected, they may outlive the remaining equity or struggle with rising costs associated with aged care or other needs. Furthermore, borrowing limits are usually tied to the homeowner’s age, meaning younger borrowers can access less equity.
Before considering a reverse mortgage, it’s essential to seek independent financial advice, thoroughly understand the terms and conditions, and explore alternative options. While it can be a helpful tool for some, careful planning is critical to avoid long-term financial difficulties.
Variable
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR.
1 Year Fixed
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR. At the end of the three year fixed period, the borrowers interest rate will revert to a standard variable rate for the life of the loan.
