Citi and IFM Investors bankroll $300m package to help seniors tap their home equity
Citi and IFM Investors are bankrolling a $300 million package for independent specialist retirement funding provider Household Capital. The funding will bolster Household Capital’s strategy to allow seniors to tap into their home equity to fund their retirements.
City and IFM are providing a new securitisation debt facility, according to a report by The Australian. The facility is being launched on the heels of the federal government’s announcement that it is revamping its Pension Loan Scheme.
The program, now rebranded as the Home Equity Access Scheme, provides Australian seniors with non-taxable fortnightly loans using their real estate as security. Treasury’s Retirement Income Review, released last year, found that tapping into relatively small portions of home equity could substantially boost retirement income for many people, The Australian reported.
But the scheme has seen low uptake since its launch in 2018, with only about 5,100 current participants. Retirees have tended to avoid using home equity to fund their retirement, despite it being their largest source of wealth.
Superannuation Minister Jane Hume told The Australian that seniors should consider the option.
“As the Retirement Income Review found, owner-occupied housing is the largest asset class for many of today’s retirees,” Hume said. “Whether it be downsizing or equity release, drawing on the value in the family home can give retirees an important choice to boost their incomes in retirement.”
Household Capital wants to meet the demand from Australian seniors seeking long-term funding for their retirement, The Australian reported.
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“We originate responsible, long-term, low-risk Australian residential mortgages, enabling retirees to access some of the equity in their home to achieve a more secure and dignified retirement, recognising the family home can be both the best place to live and a way to fund retirement,”said Joshua Funder, CEO of Home Capital. “In partnering with Citi and IFM Investors, we are making access to home equity more efficient, more available and more reliable for retirees. This funding facility delivers Australian retirees low interest rates, which mean more access to their home equity retirement funding.”
The new facility will fund Household Capital’s existing $150 million mortgage portfolio, which has a weighted average loan-to-value ratio of less than 20%, The Australian reported.
