Older Aussies face huge 600 per cent increase to mortgage debt

Older Aussies are facing huge increases to mortgage debt. Source: Getty

Between 1987 and 2015, the real mortgage debt of older borrowers aged over 55 blew out by 600 per cent, and it has negatively affected their mental health, new research shows.

New findings from the Australian Housing and Urban Research Institute (AHURI) also show older Aussies’ mortgage debt to income ratio has tripled, from 71 per cent to 211 per cent in the same time period, which reflects a huge increase in repayment risk and mortgage payment difficulties.

And, when older Aussies faced mortgage payment difficulties, their mental health scores reduced by 2 points for males and 4 points for females.

Curtin University professor of economics, Rachel Ong ViforJ, told the ABC the stats were “quite shocking”.

"Our research shows that if you are carrying a mortgage debt and having difficulty repaying it in later life, then your mental health is likely to be poorer than someone who does not have this issue."

What will happen to older Australian borrowers?

The AHURI predicts more Aussies will need to start living in private rentals.

“Our modelling predicts an increasingly tenure polarised seniors population,” the report said.

“Outright ownership status will be attained later in life and at lower real incomes. Mortgagors will have a relatively younger age profile and higher real incomes.”

“Tenants will fall further behind in terms of employment, real incomes and health. In 2031, we can expect that over 200,000 older Australians will be living in private rental housing and in need of assistance with one or more activities.”

The AHURI expects the combination of tenure change and demographic change to increase Commonwealth Rent Assistance eligibility among seniors aged 55 and over.

“It is forecast to rise from 414,000 in 2016, to 664,000 in 2031, an increase of 60 per cent over the forecasting horizon. The population of seniors is expected to increase by a much lower 35 per cent, so a growing dependence on CRA is anticipated.”

That will put a strain on the Federal Government to increase the CRA budget from $972 million to $1.55 billion by 2031.

“Our projections suggest that 1.88 million older Australians could be in housing poverty in 2031,” the report said.

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