Do New Zealand home equity release schemes provide value for money?

Thomas Benison () and Trinh Le
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Thomas Benison: Motu Economic and Public Policy Research

No 24_03, Working Papers from Motu Economic and Public Policy Research

Abstract: Home equity release refers to financial products that allow people to access the equity that is tied up in their own homes. Home equity is a large part of household wealth in New Zealand, making it an important asset that could potentially be used to fund retirement. However, the take-up of equity release products such as reverse mortgages is very low. This research examines whether home equity release schemes currently available in the New Zealand market provide value for money and how they might provide a suitable form of retirement income for some people. The available data confirm the existence of many households with low retirement income and high housing wealth, highlighting those who stand to potentially gain from home equity release. Assessments of the features and costs of current home release schemes, alongside worked examples using realistic values, highlight the scenarios when home equity release may (or may not) be beneficial. Depending on current circumstances and future financial needs, home equity release may be a suitable form of retirement income for some retirees but not for others.

Keywords: Home equity release; reverse mortgage; wealth decumulation; retirement (search for similar items in EconPapers)
JEL-codes: J14 J26 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2024-09
New Economics Papers: this item is included in nep-age, nep-ban, nep-ipr and nep-ure
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