Judith Davey: The development of Home Equity Release in New Zealand

Home equity release (HER) schemes are a recent feature in New Zealand. The government ran a pilot scheme in 1990, which did not continue, and commercial reverse annuity mortgage products were marketed through one life assurance from 1991. In the mid-1990s I carried out research on consumer perspectives and made comparisons with the UK.[1] Growth was slow but from 2004 several new schemes have appeared, mainly using the reverse mortgage model. There is also a scheme whereby local authority property taxes can be "rolled up" against home equity. The pace of growth in home equity release products has accelerated. A business monitor estimated that in the 2004-2005 May year $NZ45 million was advanced in loans.

There are risks and barriers to the development of commercial HER schemes on both the supply and demand side. I have taken a special interest in the consumer viewpoint and conducted a large-scale survey of New Zealand HER clients in 2006, commissioned by the Retirement Commission and the Office for Senior Citizens.[2] In addition I have produced general assessments of the HER field, [3] advised the Office for Senior Citizens on the regulation of HER schemes, and contributed a paper to the current government review of Retirement Income Policy. My research on consumer attitudes has illustrated high levels of satisfaction with HER schemes in New Zealand. I continue to monitor the field and keep in touch with the main HEC providers as well as relevant government agencies.

My personal view is that HER is an option which should be available to older home owners, it can contribute to their having better standards of living and can be useful in their financial planning and decumulation in later life.  However, strong initiatives are required to ensure consumer protection and to promote thorough understanding of what HER entails and the details of the schemes among the population as a whole.

 

Dr. Judith A. Davey is Associate Professor and Senior Research Associate at the Institute of Policy Studies, Victoria University of Wellington, New Zealand. Judith has been active as a researcher on Home Equity Release in New Zealand for several years. She has published several articles and research reports about Home Equity Release.

E-mail: Judith.Davey@vuw.ac.nz




[1] Davey, J. (1996) Options for Older Home-owners, Centre for Housing Policy, Research Report, University of York;  Davey, J. (1996) Making Use of Home Equity: Comparisons between Britain and New Zealand, Social Policy Journal of New Zealand, December 1996, Vol.7, p. 128-142; Davey, J. (1995) Putting Housing Wealth to Work: Home Equity Conversion in New Zealand, Ministry of Housing, Wellington, 1995). 

[2] Davey, J. and Wilton V. (2006) Home Equity Release Schemes in New Zealand: Consumer Perspectives. Wellington. http://www.retirement.org.nz/index.php?currentPage=20&file_details=1093.  

[3] Davey, J. (2005) The Prospects and Potential of Home Equity Release in New Zealand. http://www.retirement.org.nz/files/ER%20Report%20Final%20March%202005.pdf



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