Research Summary

This research investigated the growing numbers of middle-aged and older Australians who are carrying mortgage debt into retirement and paying off higher levels of debt relative to house values and income. Between 1987 and 2015, mortgage debt among older mortgagors increased by 600 per cent (from $27,000 to over $185,000). These trends have significant consequences for older Australians’ wellbeing, retirement wealth management and government incomes policy and housing assistance programs.

Research Outcomes

Between 1987 and 2015, the real mortgage debt of older mortgagors aged 55+ blew out by 600 per cent. Real house price and income growth lagged behind, tripling and doubling respectively over the period.

Older mortgagors’ average mortgage debt to income ratio tripled from 71 per cent to 211 per cent between 1987 and 2015, reflecting a severe increase in repayment risk. In addition, repayment risk is correlated with mortgage payment difficulties.

When older mortgagors face mortgage payment difficulties, males’ SF-36 mental health scores are reduced by around 2 points and females’ by 4 points. Late mortgage payments also raise males’ K10 psychological distress scores by nearly 2 points.

The budget share devoted to necessities increases as repayment risk rises. In the top MPIR quintile, the budget share accounted for by necessities is around 3 per cent higher than in the bottom quintile, holding all other factors constant.

Due to tenure and demographic change, the demand for Commonwealth Rent Assistance (CRA) is projected to rise by 60 per cent, from 414,000 in 2016 to 664,000 in 2031. The unmet demand for public housing from private renters aged 55+ is expected to rise by 78 per cent—from 200,000 to 440,000 households—between 2016 and 2031.

The CRA budget cost is predicted to increase steeply, from $972 million in 2016 to $1.55 billion in 2031 (at constant 2016 prices).

In the bottom two mortgage-payment-to-income ratio (MPIR) quintiles the odds of superannuation drawdowns are only around 60 per cent of the odds in the top quintile.

Older retired mortgagors exhibit significant heterogeneity with respect to their wealth management strategies, as well as their consumption profiles.