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

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.