The question of loans to persons approaching retirement age was raised a number of times during our recent seminars.

ASIC updated its Regulatory Guide 209 on Responsible Lending in March 2011 to address this issue:

RG 209.71 gives 2 examples of where a loan to older borrowers can be assessed as “not unsuitable” by borrowers meeting repayment obligations from sources other than current income: one where repayment will be from superannuation and another where the borrower has future plans to sell the principal residence and downsize.

RG 209.70 notes that ” Information obtained from reasonable inquiries into the consumer’s financial situation (see RG 209.27) will assist the credit provider or credit assistance provider to establish whether the consumer has the appropriate capacity to meet repayment obligations, despite foreseeable changes to income.”

Note that new responsible lending provisions will apply to reverse mortgages from 1 March 2013.