In a surprise move, the Reserve Bank of Australia last week announced a 1.00% cut to the official cash rate in response to the worsening credit crisis.
This is welcome news indeed for seniors who had previously seen their reverse mortgage interest rates nudge 11% in some cases. With the reverse mortgage banks and lenders passing on about 0.80% of the Reserve Bank reduction, some borrowers can now expect their rates to be as low as 9.35%.
Better still, I predict further cuts of about 1% over the coming months. As reverse mortgage interest rates begin to reduce, reverse mortgages will become an increasingly attractive option for Australian seniors facing investment losses on superannuation and shares.