Mortgage debt causing older Australians distress

Photo: Dmitriy Shironosov
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MORTGAGE debt among Australians aged 55 and over blew out by 600% between 1987 and 2015, presenting the country with growing mental health and economic challenges.

A new report, Mortgage stress and precarious home ownership: implications for older Australians, assembled for AHURI by researchers from Curtin University and RMIT University shows only 14% of older Australian home owners were paying off the mortgage on their home in 1987, a share doubled to 28% by 2015.

Over the period, the average real mortgage debt for the age group skyrocketed by 600%, from $27,000 to over $185,000, while average mortgage debt to income ratios tripled from 71% to 211%.

The mortgage debt burden has increased from 13% of the value of the average home in the late 1980s to around 30% in the late 1990s, at the beginning of the property boom, and it has remained at that level since. Over that time, average annual mortgage repayments have more than tripled from $5,000 to $17,000 in real terms.

Older mortgagors reported lower mental health and higher psychological distress scores than older outright owners, the report found, highlighting impacts on individual wellbeing and for the retirement incomes system.

Psychological surveys measuring mental health on a scale of 0 to 100 revealed that mortgage difficulties reduced mental health scores for older men by around 2 points and a more pronounced 3.7 points for older women.

Marital breakdown, ill health and poor labour market engagement all adversely affected older female mortgagors’ mental health scores more than men.

“These mental health effects are comparable to those resulting from long-term health conditions,” the report’s lead author, Professor Rachel ViforJ of Curtin University said.

“As growing numbers of older Australians carry mortgages into retirement, the rising trend in mortgage indebtedness will have negative impacts on the wellbeing of an increasing percentage of the Australian population.”

High mortgage debts later in life also presents significant challenges for housing assistance programs. The number of Australians aged 55 and over and eligible for Commonwealth Rent Assistance is expected to increase by 60%, from 414,000 in 2016 to 664,000 in 2031.

This is expected to push CRA payments in the federal budget from $972 million in 2016 to $1.55 billion in 2031. Unmet demand for public housing from private renters in the age group will climb 78%, from roughly 200,000 households in 2016 to 440,000 households in 2031.

Challenges will also be presented to government retirement income policies. Longer working lives and the use of superannuation benefits to pay down mortgages are increasingly likely outcomes.

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