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You did use to see a few of those loans being done by the banks,...

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BradlyBear

676 Posts.

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10/12/17

17:19

Post #: 29518526
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Originally posted by cafa ↑

Yes indeed. How can it make sense for someone in a $3m house, without mortgage, be getting an age pension.

The challenge from a political view is that the first party that starts to discuss this topic is already lost at the next election. Most folks will complain that they have worked hard for those house and have a Good given right to the proceeds and pay no tax on the profits. The children of those folks will protest until the cows come home as they see their inheritance being erroded away.

Firstly, a huge majority of folks that have been in their home for over 10 years have made windfall profits at the expense of the next generation. A huge transfer of wealth from young to old! One can work hard to pay off a mortgage and some folks do this and never see the huge gains in value.

As for the children, well this is more difficult. On the one hand, they should expect nothing and their parents well being in old age should be the priority. On Tuesday other hand due to the huge wealth transfer mentioned above one can understand a view that they have paid a lot more than they should to get a house and are relying on some instant windfall to pay off their huge mortgages. A very emotive area.

One way forward, would be for the Mian residence to count in the asset test - there is no good fiscal reason why it should not. Political suicide!!! Probably, to get some traction, it would have to exclude the medium house value in each capital city, or something along these lines. So, if the value for Sydney was $1m, then an excess would be considered as 'in play' for the age pension. In Wagga the value may be $300k. The idea being that an average home is still excluded from mths age pension test, but over average then folks should get a little less.

Combined with the above, the goverment should set up a quasi federal bank which would loan against the property value up to twice the age pension per year. The total loan value would to capped to a % of the property value, say 66% or so. So folks in a $3m harbour side home would be able to draw about double the income that otherwise they could get On the age pension. Big win for them.

They would be interest on the payments, at around the long term bond rate plus 1%. The new federal bank would then package upon these loans and sell them to insurance company's and the like who are crying out for long term debt instruments. Due to the method of accounting these would not be considered federal debt and thus not impact the credit rating of the government.

The additioanal spending power, may and I use the word with caution, have a positive impact on the general economy.

Who would have anything to complain about the above - alas the children, and many will layout from the rooftops about their right to a share of huge unforeseen profits.

One to ponder over of a Sunday morning.

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You did use to see a few of those loans being done by the banks, no sure if they still do or what the reason was behind people doing it. Maybe they just wanted more money in their retirement or maybe they didn't have any of those leeching children so they didn't care if the house went when they went
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