Scheme is not viable because of lack of demand due to low payout to borrowers
The Hong Kong Mortgage Corp (HKMC) has put plans to launch a 'reverse mortgage' scheme on hold due to lack of demand, the South China Morning Post understands.
Reverse mortgages, also known as home equity conversion mortgages, allow homeowners to borrow an agreed amount against the equity in their properties and are chiefly used by the elderly to help fund their retirement.
Instead of making regular payments for the loan, the homeowner receives a regular monthly instalment and when he or she dies, the bank will repossess and sell the property to recover the loan. Any surplus from the sale after the reverse mortgage has been recovered will be returned to the home owner's estate.
The HKMC studied the feasibility of launching such a product in order to broaden its income sources but board members agreed yesterday it was not worth launching the scheme at the moment.
'The monthly payout to borrowers would be relatively low. So it hasn't proved attractive,' a source said.