Union criticises return of 'risky lending'

Photo Mark Coote

The finance workers' union, Finsec, has come out against the move by ASB to offer reverse mortgages or equity release loans.

"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 Finsec campaigns director Andrew Campbell.

The loans allow home owners to take equity out of their houses while still living in them. They are effectively a loan against the value of a home, giving either a lump sum, line-of-credit or in regular instalments.

Finsec said 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.

ASB's reverse mortgages allow borrowers over 65 use the equity in their home and are charged compounding interest but do not have to make any repayments, he said.

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," Campbell said.

- NZPA