This report examines the financial costs and risks of alternative housing equity withdrawal mechanisms and provides recommendations about mitigating risks associated with mortgage equity withdrawal products for older Australians.
Objective and key research questions
This Final Report is the second output of a project that aims to uncover the uses, risks and barriers to housing equity withdrawal (HEW) in later life. By HEW, we are specifically referring to any mechanism that home owners use in order to draw down on the equity stored in their primary home. These alternative mechanisms typically take the form of in situ mortgage equity withdrawal (MEW) where home owners increase the mortgage debt secured against their property without moving, downsizing where home owners move into a lower value owner-occupied home, and selling up where home owners cash in on their primary home and move into the rental sector.
The overall objective of this project is to provide a comprehensive evidence base for policies and programs aimed at maximising the availability and quality of information to support Australians in their decision-making over the use of housing wealth in later life.
This Final Report addresses the following key research questions related to the project’s objective:
1. To what extent are older Australians tapping into their housing equity via alternative mechanisms, and what motivates HEW by older Australians?
2. What impedes HEW, and what are the risks associated with the use of HEW mechanisms in later life? How do these vary across the older population according to socio-economic groups and across scenarios relating to asset price changes and tax-benefit settings?
3. How do older Australians perceive the different mechanisms for HEW and how do these perceptions influence decisions about the use of HEW?
4. What mechanisms can mitigate the risks of HEW and overcome barriers to alternative HEW mechanisms in later life?
Authored by Rachel Ong, Therese Jefferson, Gavin Wood, Marietta Haffner and Siobhan Austen.