‘Only get worse’: 1 in 5 first homebuyers to retire with a mortgage
At least one in five first homebuyers in Queensland are likely to still be paying off a mortgage when they retire, as “alarming” figures show loans are getting bigger and people are entering the market later.
Westpac lending data reveals about a fifth of its first homebuyer loans issued over the past 12 months were to buyers over the age of 40, which means minimum repayments on a standard 30-year loan would stretch well into retirement age.
The average first homebuyer age for loans issued across Westpac’s lender network has jumped by nearly two years over the past five years to 34, but data from broker networks puts the average age as high as 37.
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The average age of a first homebuyer is now 34-37, according to Westpac data.
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For those borrowers buying today, the numbers don’t lie. On an average, 30-year, $678,000 loan at 5.5 per cent, minimum monthly repayments sit at $3850.
It comes as separate analysis shows 54 per cent of homeowners aged 55 to 64 are still paying off their home loans.
Property research group SuburbTrends’ analysis of ABS data reveals the median age for paying off a mortgage has stretched from 52 in 1981 to 62 in 2016.
More than 50 per cent of homeowners aged over 55 are still paying off their mortgages. Image: John Gass.
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By the 2021 Census, almost one in four Queenslanders aged 55-64 were still paying home loans. SuburbTrends director Kent Lardner said it was likely to get worse.
“The biggest issue and concern is not the retiring cohort of today,” he said. “The bigger story emerges in 25 years from now.”
Mr Lardner said if a first-home buyer today purchased an inflated asset that did not keep growing they will be saddled with a large mortgage into retirement and have limited options to downsize.
Kent Lardner from SuburbTrends.
This was a stark contrast from many people retiring today who had more options, even if they still carried debt.
“If you purchased 20 years ago or more, then you are likely in home #2 or #3 by now and have a small mortgage relative to the value of the home.
“And buying 20 years ago means you have ridden a massive growth wave, which may not likely be the case for the next 20 years considering the key metrics of affordability.
“This group will have a stack of equity and can downsize with plenty of options.”
At least one in five first homebuyers taking out a mortgage today will still be paying it off when they retire, new figures reveal.
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Westpac senior economist Matthew Hassan said recent first-home buyer incentives, including the expansion of the First Home Guarantee Scheme, would help some people buy sooner but would not substantially reform the market.
“We’re not expecting a big jump in overall borrowing beyond what rate cuts would already deliver,” Mr Hassan said.
“The expanded first home guarantee will make it easier to get a foot in the door by lowering the deposit hurdle, which is fantastic … (but) loan serviceability will remain a challenge for buyers.”
Matthew Hassan senior economist Westpac Bank.
Compare the Market’s economic director David Koch said the path to home ownership was changing, with loans getting bigger, repayments larger, and many entering the market later in life.
“It could make life a bit more complicated for banks and lenders that have to scrutinise borrowers’ ability to service loans and avoid debt running deep into retirement,” Mr Koch said.
“The government’s Help to Buy Scheme may enable some Australians to get into the property market faster and younger, meaning they can start tackling that debt sooner.
“But there’s also a possibility that with 5 per cent that they’ll be paying off much larger loans that may be difficult to service if, for example, they need a career break or take a salary cut at some point. There’s a possibility that those people will have to extend the life of their loan when they refinance.”
Compare the Market economic director David Koch. Photo: Jono Searle.
Mr Koch said the solution may lie in small but consistent top-ups.
“An extra $300 a month could shave five years off the life of a 30-year mortgage,” he said.
That’s achievable for couples earning the national average of $104,520 each, with repayments still under a third of combined income.
But for a single borrower on the same wage, more than half their pay would be chewed up by the mortgage.
Banks are also expected to step up as more Australians approach retirement with a mortgage. Lenders are likely to push “exit strategies” — from working longer, to downsizing, or making extra repayments — as older borrowers grapple with debt in their 60s and beyond.
“Banks have an obligation to ensure the applicant has a suitable exit strategy before submitting their application if they will be of retirement age when the loan is due to conclude,” Mr Koch said.
More Queenslanders are set to retire with a mortgage, putting pressure on the economy and retirement system. Image: John Gass.
“We might see home loan exit plans become a more common thing in future, if future generations struggle to shed their debt before reaching their retirement age. We’ve already seen new 10-year interest-only loan products become available as an option for people
servicing loans into their golden years.
“It is a big issue. For many, using a big chunk of their superannuation to pay off a home loan when they retire will severely impact their retirement lifestyle.
“The other option is taking out a reverse mortgage, which, in many cases isn’t ideal because it often means copping a higher interest rate and eating into your equity — money better spent on your retirement.”
Retirement Living Council (RLC) executive director Daniel Gannon said the figures were “alarming”.
Daniel Gannon, executive director of the Retirement Living Council. Photo: Jeremy Piper.
“Debt is following us into retirement, and it’s dragging people down,” Mr Gannon said.
“That debt doesn’t just strain the budget — it delays care, ramps up stress, and forces tough decisions about what is prioritised in retirement.
“Our retirement system is stuck in the past, and older Australians are paying the price.
“It was built for a world of early homeownership, shorter working lives, and lower costs. That world doesn’t exist anymore, with relevant policy frameworks effectively frozen in time.”
The RLC is pushing for reforms that make it easier to rightsize, reduce debt, and free up equity.
“If you’re still paying a mortgage at 65, you shouldn’t be punished by prehistoric policies,” Mr Gannon said.
“The CRA cap hasn’t kept pace with property prices. In 1997, it covered 55 per cent of the median home, but today it’s just 26 per cent. That means many pensioners are locked out of the support they need, just because they’ve rightsized into a retirement village.
“People are buying later and retiring later, meaning the system has to catch up.
“We need a modern approach to retirement that reflects how Australians actually live today.”
Seniors First founder Darren Moffatt said more Australians were retiring with a mortgage because of “a systemic failure of public policy, with the blame squarely at the feet of bureaucrats”.
“You can trace it back to the deregulation of the banking sector in the early nineties, Mr Moffatt said.
“A mix of more lenient underwriting standards, and increased supply of credit via mortgage securitisation has bid up property prices to extremely high levels by international standards. “This means people are becoming homeowners later in life, borrowing larger sums in the their 30s and 40s than in previous generations, which inevitably means more are retiring with a substantial mortgage.”
Mr Moffatt said downsizing was a powerful equity release option, especially with the federal government providing financial incentives to do so.
“If the home loan has become unmanageable, then refinancing it with a ‘reverse mortgage’ is a very effective solution,” he said.
“Most people aren’t aware you can still pay the monthly interest on a ‘reverse mortgage’ if you want, which will stop the compounding interest effect.
“But the fact regular repayments aren’t required on a ‘reverse mortgage’ takes the pressure off, and allows people to stay in the home.”
Additional reporting by Aidan Devine and Viva Hyde
