How the family home is reshaping retirement finance

According to equity release provider Homesafe, the family home is increasingly being viewed as part of a household’s retirement capital rather than simply an asset to be preserved.

This store of wealth is already being tapped by a growing number of retirees, with data from reverse mortgage brokerage Seniors First indicating that demand for mortgage loans through the Commonwealth’s Home Equity Access Scheme (HEAS) increased by 21 per cent over the 12 months to May.

The brokerage also reported a 62 per cent increase in online searches relating to reverse mortgages over the past six months, suggesting growing consumer interest in accessing housing equity during retirement.

While superannuation remains the primary vehicle for retirement savings, Homesafe CEO Dianne Shepherd said it was increasingly being treated as a “two dimensional solution”.

“Super is a vital part of the system, but it is only one part,” Shepherd said.

“Discussions about retirement readiness rarely consider the home, even though it often represents more wealth than everything else combined.”

A new concept?

Shepherd has introduced the concept of ‘retirement capital’ as a framework for assessing household wealth that incorporates the value held in the family home.

“Retirement planning in this country has become narrowly focused on what sits in a super fund or an investment account,” Shepherd said.

“But retirement capital is the entire balance sheet a household has built over a lifetime and for most Australians, the largest line on that balance sheet is the family home.”

Shepherd said longer life expectancies and ongoing cost-of-living pressures meant a broader conversation was needed around how retirement is funded and sustained.

“A balance sheet approach does not prescribe a single pathway,” Shepherd said.

“It does not suggest every home owner should access the equity in their property, nor does it diminish the role of strategies such as downsizing or drawing on superannuation. It simply broadens the lens through which retirement decisions are made.”

While new products are emerging to support this shift, uncertainty and a lack of product understanding remain barriers for many consumers, according to Seniors First.

Research conducted by the brokerage last year identified more than 150 key differences across Australia’s four major reverse mortgage providers.

Nonetheless, Shepherd said that for some retirees, the key to financial security may lie within the family home.

“There is a long-held view that the home must be preserved at all costs, typically to pass on as inheritance. That remains important for many families,” Shepherd said.

“But the home can also support financial security, lifestyle and independence during retirement itself. These decisions are not mutually exclusive and they are more balanced when households understand their full position.”

[Related: Clinch launches new equity release loan]

Want to see more stories from trusted news sources?
Make Broker Daily a preferred news source on Google.