In a seminar earlier this week, the government was told they should utilise the concept of reverse mortgage (RM) to help the kingdom’s elderly population gain financial security.
RM, which takes equity from one’s home and converts it into payments for the homeowner, can provide loans to those unsure if they have enough savings to sustain themselves, according to speakers at a seminar on the “Management of Elderly People’s Assets” in Bangkok on Wednesday.
People’s homes would still be used as collateral.
A survey conducted by the seminar’s organisers found that 70% of respondents were not confident they have enough money saved to support themselves, while 50% said they were still looking after adult children and grandchildren.
The survey was conducted among 1,091 people aged 55-70 in seven provinces, including Ratchaburi and Nakhon Si Thammarat and Bangkok, said Sunti Tirapat, a professor of risk management at the National Institute of Development Administration (Nida) Business School.
Mr Tirapat said the respondents agreed that having savings is an important part of financial security.
He said 70% of respondents were homeowners who said managing their assets was a private matter to be consulted within their families. However, they said they still need professional financial advice, the professor said.
“There is no one-size-fits-all solution here,” he said. “Every elderly person has different financial needs.”
Suparatana Tanthanongsakkun, an expert on investments and the capital market at Chulalongkorn University’s Business School, said he has discussed the RM issue with more than 100 elderly people in the provinces, and most did not know about the concept.
Those surveyed generally said they want their houses to be kept as an inheritance for their children, he said.
RM could be presented as financial help if loan terms are made flexible, Mr Tanthanongsakkun said, adding the option should only be made available when an elderly person needs an emergency cash injection.
He said RM programmes at banks currently charge an interest rate of 5% per year, which is considered high.
If the state were to make RM a welfare policy, it could control the interest rate.
Mr Tanthanongsakkun said RMs are currently approved by commercial banks to the equivalent of no more than 70% of a home’s market price.
Borrowers can choose between receiving their payments either monthly or yearly until the expiry of the loan.
He noted that in 2017, the Government Savings Bank and the GH Bank, which are both state-run, disbursed RM loans in limited amounts.