ASB reverse mortgages sign of a risky return

ASB reverse mortgages sign of a return to risky lending

The return of risky lending products and loosening lending criteria are a sign that banks have learnt nothing from the global financial crisis and recession says finance workers’ union Finsec.

ASB bank has announced it will be introducing reverse mortgages where borrowers over 65 use the equity in their home and are charged compounding interest but do not have to make any repayments. The bank recovers its money at the point which the house is sold.

“The global financial crisis forced the banks to improve their lending practices, so it is worrying to see the return of exploitative lending products, like reverse mortgages,” said Finsec Campaigns Director Andrew Campbell.

“Banks should have learnt that pumping up customer debt leads to major economic instability. Banks should be encouraging stability by incentivising saving and home ownership, not setting up new debt products that could see people lose the entire value of their home,” said Campbell.

“The global financial crisis taught us that banks behaving badly can destroy whole economies. Banks need to develop new operating models that are not fixated on loading as much debt on customers as possible,” said Campbell.

“ASB’s move into reverse mortgages is further evidence that we need new rules around bank lending. Finsec is calling for the establishment of a code of ethical lending and the establishment of a consumer protection agency to make sure lenders act fairly,” said Campbell.

ENDS

© Scoop Media