REVERSE MORTGAGES FOR HDB FLATS

Dr Teo Ho Pin asked the Minister for National Development whether the Housing and Development Board will allow its lessees especially senior citizens to take up reverse mortgages for their flats so that they can have more disposable income.

The Minister of State for National Development (Dr John Chen Seow Phun (for the Minister for National Development): Mr Speaker, Sir, the Ministry of National Development and the Housing and Development Board have explored reverse mortgage as a possible way to provide elderly HDB lessees with an additional source of income for their retirement needs.

The current reverse mortgage proposals allow a property owner to receive monthly payments over a fixed term of about 10 years. At the end of a reverse mortgage term, however, the property owner has to relinquish ownership of his house unless he is able to redeem the reverse mortgage.

After studying the conditions and implications of current reverse mortgage proposals carefully, we feel that the benefits are outweighed by the inherent limitations. The monthly payments are relatively meagre because of high financing costs. More importantly, the elderly flat-owners risk losing their homes at the end of the reverse mortgage term. Since the current terms of reverse mortgage proposals are not entirely favourable, we have decided not to pursue the reverse mortgage scheme for the time being.

Mr Simon Tay: May I ask the Minister of State whether this is a form of paternalism and it goes against the idea that citizens should take more responsibility for managing their own assets?

Dr John Chen Seow Phun: Sir, I think it is not prudent. There is a risk involved and if the elderly stands to lose his home, then I do not think it is prudent for Government to start this scheme because basically we want to encourage home ownership.

Mr Simon Tay: Sir, even if we open up the possibility, it will still be an option for the elderly. Is it not possible, therefore, that an elderly couple could be sitting on a fully paid-up flat but they have no money in their pockets, and would that not be a hardship?

Dr John Chen Seow Phun: Mr Speaker, Sir, we have other schemes to help them. In fact, we have a number of them. For instance, we have made it easier for elderly lessees of three-room flats to sublet their whole flat. Is it not better? And if they do not wish to move, and they have a three-room or bigger flat, they can sublet one room or more to derive some income. They can also sell their flat and purchase an affordable studio apartment from HDB. So there are many ways to help them. We feel that the insurance proposal at the moment is not favourable but if the insurance industry is more competitive in the future, we may re-open consideration of this scheme.

Assoc. Prof. Toh See Kiat: Sir, I would like to ask the Minister of State whether he is aware that sometimes the HDB officials will send letters to elderly lessees, who are alone, as an almost automatic reaction to tell them to give up their flat and sell it away, and this really intimidates the remaining elderly lessees into action which may not be in their interest.

Dr John Chen Seow Phun: Sir, I am not aware of this. If the Member has the details, please pass it to me.