Apr 20, 2017 10:31:32 AM

Will you be mortgage-free by retirement age?



A startling report has revealed a growing number of Australian retirees are entering retirement with a sizeable mortgage. Having to use their superannuation to pay off leftover mortgage debt could leave them without enough funds to provide for a comfortable retirement. Will you be mortgage-free by retirement age?

 A housing affordability crisis

A new report commissioned by the Australian Institute of Superannuation Trustees (AIST) has revealed a decline in home ownership rates amongst older Australians which could pose a significant threat to Australia’s retirement income system.

 The report shows an increasing number of Australian retirees will need to use some of their superannuation funds to pay off leftover mortgage debt at retirement. Larger mortgages relative to incomes as well as first-home buyers getting onto the property ladder later in life are likely the cause of this trend.

Independent economist, Saul Eslake, who conducted the research for the Australian Institute of Superannuation Trustees, said the decline in home ownership can also be seen amongst the 35 to 55 age bracket.

 The report shows the number of home owners without a mortgage dropped from 61.7 per cent in 1996 to 47.9 per cent in 2011.

 “In other words, compared to 15 years ago when almost three out of five home owners owned their home outright, home owners with a mortgage are now in the majority,” Mr Eslake’s research found.

 While it makes sense for older Australians to use their superannuation to pay off their mortgage, Mr Eslake believes the government needs to do more to address the housing affordability issue. 

 Mr Eslake told The Australian Financial Review that allowing younger people to access super for housing would only exacerbate problems with the retirement income system. He urged tighter prudential controls on lending to landlords, saying the 10 per cent limit on housing investor credit growth could be pulled back to 5 per cent. 

Bigger concerns

Overall, home ownership is the lowest it’s been since 1954. This despite interest rates being nearly half what they were in the previous two decades, and government providing several incentives in the form of first-home owner grants and stamp duty concessions.

 One of the biggest concerns, warns Mr Eslake, is the decline in outright home ownership amongst people aged between 55 and 64. Between 1995-96 and 2013-14 the number of homeowners aged 55 to 64 with a mortgage tripled to 44 per cent.

 "That's an extraordinary increase," Mr Eslake said. "It means that the assumption that superannuation will allow people to support themselves and not rely on the age pension may well be wrong by a growing margin.

 "If people use their superannuation to pay down their mortgage then they are obviously not going to have as much superannuation and may not have any at all."

 Planning ahead is vital

It is possible for you to pay off your mortgage quicker, provided you’re diligent about spending and saving. If you’d like to find out how you can get mortgage-free by retirement age, get in touch with a Mortgage Express broker and let’s start planning ahead.


While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Finservice Pty Ltd (Mortgage Express) for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.

Finservice Pty Ltd (Mortgage Express) is authorised as a corporate credit representative (Corporate Credit Representative Number 397386) to engage in credit activities on behalf of BLSSA Pty Ltd (Australian Credit Licence number 391237) ACN 123 600 000 | Full member of MFAA | Member of Credit Ombudsman Services Ltd (COSL) | Member of Choice Aggregation Services.