A feasibility study of the reverse mortgage programme (RMP) in Hong Kong

Abstract

Aging problem is continually increasing and fertility rates are declining in Hong Kong. The Government of the Hong Kong Special Administrative Region (“The HKSAR Government”) concerns on the long-term care for elderly people. To compare with other developed countries, the retirement protection for elderly people in Hong Kong needs more comprehensive improvement on long-term care expenses. Actually, not many appropriate options of long-term care expenses are seemed available in Hong Kong. Revere mortgage (“RM”) is a way to unlock home equity into regular cash flows without moving out of the house. Reverse mortgage is an emergency financial tool in Hong Kong. The rationale of reverse mortgage is to help the elderly homeowners to convert housing equity to improve their living standard in retirement. Although the Mandatory Provident Fund (“MPF”) was launched in Hong Kong since 2000 and has been operating for more than 10 years, the overall performance of the MPF is less than general expectation of participants that have negative impacts on their retirement plan. The majority of Hong Kong people including the elderly homeowners may not enjoy sufficient protection from MPF after retirement. Similar reverse mortgage programmes have been practicing in the United States, Great Britain, Australia, India, Korea, Japan and Singapore. In contrast, reverse mortgage market is newly growth in Hong Kong. On the other hand, reverse mortgage programmes are tried out in Singapore, India and Korea. In the research, experience of those countries can provide comprehensive and valuable information for references in order to understand more the benefits and drawbacks of reverse mortgage to Hong Kong. Therefore, this dissertation is conducted in several perspectives in Hong Kong in order to show the feasibility of reverse mortgage programme in Hong Kong. It is worth to study whether reverse mortgage could become long-term care expenses for the upper-class housing elderly homeowners, whose residential property has high market value, in Hong Kong. In the dissertation, it is showed that the potential applicants have expectation on reverse mortgage assisting them to overcome their financial burden in the long-term care. The majority of housing values in Hong Kong are adopted to refinance for the upper-class housing elderly homeowners after their retirement. Furthermore, examination of the alternative housing options is whether to be considered for the upper-class housing elderly homeowners. On the other hands, risks and benefits of potential providers of reverse mortgage programme are examined in the dissertation. Further studies on the HKSAR Government in relation to social responsibility, financial issues and regulation issues are conducted. Based on this analysis from different views and aspects, the dissertation is tried to study the feasibility of reverse mortgage whether become long-term care expenses for the upper-class housing elderly homeowners. In addition, it is to understand not only reverse mortgage can whether overcome financial burden for the upper-class housing elderly homeowners, but also understand the perspectives of society, banks and government on reverse mortgage.