The Morrison Government is rebranding the Pension Loans Scheme to be known as the Home Equity Access Scheme and reducing the interest rate from 4.50 per cent to 3.95 per cent per annum.
The cut to the compound interest rate will take effect from 1 January 2022, reducing borrowing costs for participants and allowing them to use the Scheme for longer.
Minister for Families and Social Services Anne Ruston said the move would give older Australians more confidence to tap into home equity to enhance their retirement living standards.
"The Morrison Government is committed to finding new and innovative ways to support older Australians in their retirement," Minister Ruston said.
"Home ownership is a bedrock of our society with Australians working hard to accumulate wealth in the form of real estate equity.
"The Home Equity Access Scheme allows Australians over the Age Pension age - whether they are pensioners or self-funded retirees - to unlock this equity using a trusted Government product to boost their disposable income in retirement."
The Scheme allows older Australians to get a voluntary non-taxable fortnightly loan from the Government up to a maximum value of 150 per cent of the rate of the Age Pension.
To be eligible for the Home Equity Access Scheme, retirees must have reached Age Pension age, own real estate in Australia and meet residency and certain other requirements, but do not need to be receiving a pension payment.
The changes builds on a package of proposed improvements from 1 July 2022, introduced into Parliament earlier in December, to introduce a No Negative Equity Guarantee and allow users of the Scheme to access capped lump sum advance payments.
"The lower interest rate, together with the upcoming enhancements, will make the Scheme an attractive option for retirees," Minister Ruston said.
"The new name also seeks to make sure that all retirees, not just those on a pension, know they can benefit from the Scheme if it suits their circumstances."
