Household Capital passes on more than the RBA interest rate reduction

11 November 2020

Australia’s leading home equity retirement funding provider, Household Capital, has announced a further cut to its interest rate. In response to this week’s RBA cut of 0.15 percent, Household Capital made a deeper cut, lowering its rate by 0.20 percent to a home equity access rate of just 8.95 percent.

Dr Joshua Funder, Chief Executive Officer, said, “The Reserve Bank of Australia this week made history, dropping lending rates to the lowest rate on record. Household Capital has confirmed its place as Australia’s lowest cost provider of home equity retirement funding.”

“Being able to offer the lowest possible rate to retirees is important; it means that over time our customers will benefit from being able to access more of their own home equity throughout retirement,” said Dr Funder. “Lowest rates are important to ensure the best interests of our customers are fully considered.”

Low rates and market volatility

2020 has been an exceptionally challenging year for many Australian retirees. Low interest rates have negatively impacted payments from term deposits, while the markets have reacted to months of crisis from COVID lockdowns and economic slowdowns, through to political change.

Australians in the drawdown period of their super fund journey are already faced with the challenge of estimating how their wealth today will last them for the rest of their lives. Factoring in how long they will live and how costly their care might be is difficult. If you add into the mix diminishing returns from interest payments and dividends, along with chaotic markets, this has been an extremely stressful year financially for many Australian retirees.

“We can reduce this unnecessary financial stress for older Australians by providing responsible, long-term access to their home equity,” said Dr Funder. “Household Capital allows our customers the certainty of safely increasing their financial liquidity, and guaranteeing lifetime occupancy of their family home.”

Confidence is good for older Australians and good for the Australian economy

Many retirees have experienced very high levels of stress from the health, economic and political uncertainty of 2020. This leads to limited lifestyles, with minimum spend, increased anxiety and low enjoyment. A Household Loan from Household Capital provides safety and certainty.

With additional funds, retirees can access additional health, allied health and support care, or make improvements to their home. Such modifications often increase safety; such as wet rooms, downstairs facilities, safety rails and ramps. Older Australians are also able to start living a better retirement lifestyle, whether that’s covering the basics like using utilities without fear and buying better quality food, a new car for active retirement  or simply having the confidence to  treat themselves to small luxuries.

A living legacy is a popular choice that spreads intergenerational joy. By accessing their home equity – what we call their Household CapitalTM – now, our customers are able to share funds with family members when they need it most. The ‘Bank of Mum and Dad’ is the fifth largest lender in Australia, primarily helping their children to buy their own home or grandchildren pay for educational expenses.. Many of our customers are delighted to pass on their wealth now to allow family members to establish their home or study while they are alive to watch and enjoy the results.

“Accessing funds now that could otherwise be tied up in property for another twenty or even thirty years is good for our retirees and good for their families. It also helps the economy at a time when the RBA has indicated that stimulation is vital. Retirees accessing their funds are spending welcome dollars in today’s economy. When people are gifted their inheritance in advance, at a younger age, they spend it on growth items like their own housing or education.” said Dr Funder.

2020 highlights the desire to live at home

October’s Household Capital 2020 Retirement Outcomes research, conducted for the organisation by Your Life Choices, showed that 73 percent of homeowners aged over 60 wish to remain in their own home.

As COVID has claimed thousands of lives across aged care facilities worldwide, many Australian retirees have become more resolute in their desire to stay at home.

Dr Funder says, “Older Australian’s see the reports from the Royal Commission, read news about aged care facilities and most importantly hear directly from loved ones, siblings, friends and family in aged care. Many are clear that for now, home is the safest place to be. With Household Capital their home can be both the best place to live and a great way to fund their retirement.”

COVID-19 direct response

2020 has been a time of financial hardship for some retirees, many of whom have been unable to access government support. Household Capital responded by releasing the $20K Top Up, which allows accelerated access to a $20,000 household loan. For eligible applicants, with a simple online application process, the funds can be available within two weeks.

As with all Household Loans, regular interest repayments are not required; however, customers have the flexibility to pay interest or repay their loan at any time without financial penalty.