More Victorians set to retire still carrying mortgage debt
The great Victorian dream of retiring debt-free is collapsing, with families forced to carry mortgages into what should be their golden years.
More Victorians are reaching retirement still paying off their mortgage, with agents and brokers warning younger buyers could face the same fate as loans grow larger and people enter the market later.
Westpac research shows the average age of first-home buyers across its national lending network has climbed to 34, up almost two years since 2020.
SuburbTrends analysis of ABS data reveals the median age for paying off a mortgage has stretched from 52 in 1981 to 62 in 2016.
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By the 2021 Census, almost one in four Australians aged 55-64 were still paying home loans.
SuburbTrends director Kent Lardner said the bigger concern was what lay ahead for today’s younger buyers.
“If a first-home buyer today purchases an inflated asset that doesn’t keep growing, they could be saddled with a large mortgage into retirement with fewer options to downsize,” Mr Lardner said.
McGrath Coburg/Brunswick’s Kelli Johnson says skyrocketing living costs have left more Victorians dragging mortgage debt into later life.
McGrath Coburg/Brunswick agent Kelli Johnson said the change was stark compared with a decade ago.
“Everyday costs – utilities, services, even groceries – have climbed so high that more people are carrying debt into later life than ever before,” Ms Johnson said.
“Ten years ago households could manage. Now the financial pressure is far greater.”
Ms Johnson said many buyers in their 30s and 40s were already struggling to secure finance, with family wealth increasingly stepping in to bridge the gap.
“Many turn to their parents, either borrowing a deposit or being gifted funds,” she said.
McGrath Langwarrin’s Ty Luff warns growth corridor buyers are especially vulnerable, with small deposits turning into lifelong debt traps.
McGrath Langwarrin agent Ty Luff said mortgage stress was more concentrated in growth corridors where buyers had entered with smaller deposits.
“In areas like Cranbourne or Clyde, many buyers came in with small deposits and are far more leveraged,” he said.
“Over the past 20 years I’ve noticed a real shift. A lot of people redraw on their mortgage for things like a new car or holidays, so instead of paying the loan down, they keep extending it.”
Mr Luff said older homeowners were increasingly selling the family home to downsize and free up equity.
“The banks generally won’t lend beyond a certain age. They want to see loans repaid before someone reaches their mid-60s,” he said.
“So the pressure is there to have things under control by then.”
Across Victoria, more households are finding retirement overshadowed by the crushing weight of home loans. Picture: Jake Nowakowski
Mortgage broker and Frame Finance director Imogen Alexy said the contrast with the baby boomer generation, who largely entered retirement debt-free, was significant.
“A few years ago, paying off your home loan before retirement was an achievable dream, the reality now is very different,” Ms Alexy said.
“A standard 9-to-5 income often isn’t enough to clear a mortgage by the time people reach retirement.
“Without a clear plan of attack, many are heading into later life still carrying significant debt.”
Ms Alexy warned that dipping into superannuation to wipe out loans was fraught with risk.
Older Victorians are furious, betrayed after decades of work, they are robbed of a debt-free retirement.
Frame Finance director and principal broker Imogen Alexy says the dream of clearing debt before retirement has vanished for many families.
“For those with lower balances, it’s a huge concern. They may end up relying on the pension, which isn’t much to live on.
“In most cases, I’d recommend downsizing before dipping into super.”
Ms Alexy said government schemes designed to help first-home buyers into the market sooner could create fresh risks down the track.
“They get people into the market sooner, which is important, but they also mean you’re borrowing more with less equity behind you,” Ms Alexy said.
“If you’re taking a 30-year loan at 40, are you really planning to work until 70?
“You can’t just rely on capital growth to do the heavy lifting anymore.”
Seniors First founder Darren Moffatt blames decades of failed policy for the surge in retirees still owing the banks.
Seniors First founder Darren Moffatt said “a systemic failure of public policy” dating back to the deregulation of the banking sector in the early 1990s lead to more people retiring with a mortgage.
He said reverse mortgages, where homeowners convert some equity in their home into cash, could take pressure off households later in life, provided they were used carefully.
Even in Melbourne’s suburbs, where home ownership once meant security, the mortgage nightmare is following residents into old age. Picture: Tony Gough
Homesafe Wealth Release chief executive Dianne Shepherd said nearly half of Australians now retire with a mortgage, a figure that had surged by 600 per cent since the late 1980s.
“The intention of the superannuation scheme was that by the time you retire you would own your home and have enough money to live on. The reality has turned out very differently,” Ms Shepherd said.
“Many older homeowners have worked hard and raised families, but are now squeezed by rising living costs and uncertain income in retirement.”
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