A code of practice to protect the elderly when they enter into reverse mortgage arrangements was released today.

In June NZPA reported Senior Citizens Minister Ruth Dyson stating the code would be mandatory but today she said it would be voluntary for now.

It would be included in the Credit Contracts and Consumers Act which is under review.

Reverse mortgages are mostly taken up by pensioners who give title to all, or part, of their home in exchange for instalment payments of cash. The money is recovered from a pensioner's estate upon death.

Ms Dyson said such schemes freed up money to help meet needs but the Government needed to ensure they were safe.

"This code will provide confidence to those older New Zealanders who wish to raise a loan after investing most of their life savings in bricks and mortar. It will help to ensure that in retirement, funds for such things as new cars and home improvements will be available through a safe self help process.

The code sets out seven principles aimed to ensure:

* consumers are given all the information they need to make decisions;

* that providers give details of terms and conditions, all charges and cost, what benefit they get and what responsibilities were;

* no negative equity -- meaning a consumer's liability under such a scheme could not exceed the price of the house;

* a guarantee that house owners could stay in their property for their lifetime or until they chose to leave;

* that consumers got independent legal advice before signing up;

* that providers give consumers regular financial updates on their financial position under the scheme;

* that there was a complaints process and an independent and accessible disputes resolution process.

The code did not cover arrangements made within families and family trusts or social assistance, for example rates deferral schemes or advances for home maintenance.

Property Finance, which collapsed last year, had controlled Lifestyle Securities, a major player in reverse mortgages, having lent about $40 million in that market.

At the time concerns were raised that people ran into problems by borrowing too much and not understanding the effects of compounding interest.