NEW ZEALAND: Elders Happy With Equity Release

WELLINGTON (Northern Courier), September 19, 2006: A report released recently by the New Zealand Retirement Commission has shown that the majority of New Zealand older people who have taken up equity release schemes are satisfied with their decision. However, the research also found that as much as 64 percent of respondents with a scheme had not considered alternatives to equity release, and only 17 percent of respondents had shopped around – as in looking at more than one organisation offering equity release products. Equity release allows people to borrow money against their home and receive the loan as a lump sum or regular income throughout their lifetime. When they move or die, their home is sold and the loan re-paid plus interest. The research – which was jointly undertaken by the Retirement Commission and the Office of Senior Citizens – and carried out by Dr Judith Davey and Dr Virginia Wilton, from the New Zealand Institute for Research on Ageing. A total of 850 New Zealanders who had – or who had considered – an equity release scheme took part in the research. According to Retirement Commissioner Diana Crossan, the research showed that equity release schemes can be a useful option for older ‘asset rich, income poor’ New Zealanders. However, she was concerned by the lack of research into other available options. “Equity release may be an attractive option for ageing New Zealanders,” she said. “But people must first investigate all of the equity release options available to see which one best suits their circumstances.” Ms Crossan says that people considering equity release should compare schemes, understand the full cost, take into account all of the implications, discuss the idea with their family and take professional advice – as with most financial products. The research showed that almost half of the people with an equity release scheme rely solely on New Zealand Superannuation for their income, most have savings of $10,000 or less, and the average rateable value of their home is $279,000. The main uses for the funds released were to improve their standard of living –28 percent of respondents. Other uses included covering the cost of home maintenance (27 percent); their car (24 percent); or home improvement (23 percent). As much as 20 percent used the money to fund travel, and 11 percent paid off other debts – such as their mortgage. Before taking out their equity release scheme, most respondents could meet their everyday expenses but had difficulty meeting other costs – like home maintenance, replacing large household items or having the money to go on holiday. Three quarters said they had no worries about the safety or dependability of equity release schemes. Respondents said the best feature of an equity release scheme was that it made funds/income available – 39 percent of respondents – while 55 percent said the worst feature was the high interest and costs associated with the scheme. For more information, visit www.retirement.org.nz ©2006 Presstige Community Newspapers