Think tank calls for reverse mortgages for elderly
A think tank close to Chief Executive Donald Tsang Yam-kuen has proposed the introduction of reverse mortgages and housing insurance for the elderly to help ease their financial burden in retirement.
In a study released yesterday, the Bauhinia Foundation Research Centre said reverse mortgages enabled the elderly to meet their financial needs by borrowing against the equity on their homes, where they would continue to live.
Reverse mortgages are available in many countries, including Britain and Canada, but have yet to be introduced in Hong Kong.
Anthony Wu Ting-yuk, chairman of the centre, said there was no clear policy to address the housing needs of those outside the 'welfare net'.
The centre's secretary general, Gregory Leung Wing-lup, said it was traditional for the elderly to leave property to their children. 'But the situation is changing. Nowadays, the younger generation - who are generally better educated - may not be so keen to get their parents' properties,' he said.
'Elderly homeowners could ease their children's burden of supporting them by drawing down some money to meet their financial needs.'
A reverse mortgage allows a homeowner to take out a home loan with a bank or financial institution in return for a lifetime annuity. The funds can be paid in monthly instalments and repayment is deferred until a homeowner dies, sells or moves.
The bank or financial institution can then either take over the property or offset the loan with accrued interest from the sale proceeds.
According to a report released by the Business and Professionals Federation of Hong Kong in 2008, there were about 400,000 homeowners in 2006 aged over 50 and free of mortgage debt.
Of those, 120,000 did not live with their children. This potential client base for reverse mortgages was expected to grow to 260,000 by 2036, which would mean a sizeable market for financiers, the report said.
Centre director Winnie Ng expected demand for reverse mortgages to rise substantially in the next 10 years given the ageing population.
The Mortgage Corporation is conducting a feasibility study on reverse mortgages. The centre said the government should consider inviting the Mortgage Corporation to insure approved lenders against losses if withdrawals exceed equity when a property is sold.
The centre also urged the insurance industry to study voluntary housing insurance to cover accommodation for the elderly.
At the end of the contribution period, policyholders would be able to buy - using their lump sum - the right to live in 'lease for life' flats. These flats are similar to those under the Housing Society's Senior Citizen Residence Scheme.
The centre also suggested low-rise retirement villages be built around green belts and country parks in the northeastern and northwestern New Territories.
Peter Cheung Kwok-che, a legislator representing the social welfare sector, said reverse mortgages would appeal to elderly people without children or those whose children had emigrated. He said the centre's proposal to develop retirement villages would help alleviate the acute shortage of places in nursing homes.
Easing the burden
Reverse mortgages allow seniors to borrow against home equity
Proportion of the elderly in Hong Kong who live alone or with their spouse only: 37%