Fewer Australians debt free at retirement

The number of Australians going into retirement with mortgage debt is rising rapidly, according to new research.

Rachel Ong ViforJ, a professor of economics at Curtin University, and Gavin Wood, emeritus professor of housing at RMIT University, analysed data from a recent ABS survey of income and housing and found an increase in the proportion of "mature age" homeowners owing money on mortgages.

For home owners aged 55 to 64, the proportion with home loans to pay off increased from 14 per cent to 47 per cent over the 25 years from 1990 to 2015.

For those over 65 the proportion with home loans increased from 7 per cent to 12 per cent over the same period.

The average home loan debt-to-income ratio for the over-65s has increased from 72 per cent to 152 per cent.

ViforJ and Wood believe there are three reasons for this trend. First is the increase in property prices, ahead of growth in incomes. Since 1970 the ratio of the national dwelling price to income has doubled.

Second, home owners use flexible mortgage products that allow them to draw on their home equity as needed for other purposes. During the first decade of this century, one in five home owners aged 45 to 64 increased their mortgage debt even though they did not move house.

Finally, older home owners appear to be taking on bigger mortgages or delaying paying them off, anticipating that they will work longer than people in earlier generations. They also have the option of drawing down superannuation benefits to cover debts.

In 2017, around 29 per cent of lump sum superannuation withdrawals were used to pay down mortgages, pay for home improvements or buy new homes.