Older Aussies ‘in distress’ as mortgage debt across generation skyrockets

The struggle to make mortgage repayments later in life is causing significant stress among the older generation with a new study revealing debt is leading to worsening mental health for the retired population trying to pay off their home. The research carried out by the Australian Housing and Urban Research Institute revealed a concerning rise in mental distress across Australia as the country battles with a blow out of a whopping 600 per cent in Aussies aged 55 and older with mortgage debt between 1987 and 2015. This works out to be nearly half of all Australians aged between 55 and 64 still with a mortgage.

Shockingly the research showed a reduction of two points in the mental health score for males battling mortgage repayment difficulties, while females were worse off, dropping four points in times of financial stress. The average mental health score was measured at 73.5 for women, whereas men sat at around 77.1.

The eye-opening data, teamed with the tripling of house prices and doubling of income growth over the period, has left senior Aussies in a difficult position when it comes to their finances. According to National Seniors Chief Advocate Ian Henschke, it is no coincidence that people aged 55 to 64 also represent the largest age group claiming the Newstart allowance. Henschke claimed older Aussies are facing the “perfect storm” with rising debt, job insecurity caused by ageism and pension poverty all adding to the stress of the situation.

“There are 184,790 Australians aged 55 to 64 on Newstart and on average they stay there for three and a half years,” he explained.

“If you don’t have a job and you’re still paying off a mortgage, then you are eating into your savings and are left with nothing to retire on which has a major impact on mental health.” Henschke continued by urging the Federal Government to rethink its refusal to include Newstart as part of its upcoming review into retirement income and said ruling it out is “completely wrongheaded thinking”.

“Both the government and the opposition appear to be asleep at the wheel as this car crash is happening,” he added. “If the best form of welfare is a job, where is the targeted training and employment programs? We have a retirement income eco system that to be healthy requires people in their 50s and 60s to keep their jobs. That’s when most people traditionally had their best earnings and savings years as often their children had grown up and left home.”

Meanwhile, Council on the Ageing (COTA) Chief Executive Ian Yates also added his two cents to the discussion, claiming the spiralling housing costs, lack of suitable housing options and under-investment in appropriate and affordable housing is leading to homelessness, particularly among older women.

“For older people a secure home can be the difference between good health and decline in health which is rarely factored into the housing debate,” Yates explained. “And having appropriate and secure housing is also an essential component of an effective retirement income policy.”

He continued: “In particular, older women are feeling the brunt of a system that’s not working fort them; after a break in their careers to care for family; or because or a marriage breakdown; and with less superannuation behind them. This report from AHURI reveals how widespread housing stress is among older people, that it’s increasing and is impacting every generation.”

That isn’t the end of the problems according to Yates though as he claimed the effects of this new development would be felt down the line as the population ages, with increasing numbers of older people requiring Commonwealth Rent Assistance (CRA). The new data estimated the number of people eligible for CRA will increase 60 per cent by 2031, with Yates explaining could develop into a much bigger issue for the country.

“There is a real risk of a pattern developing of people using their superannuation to pay off mortgage debt, leaving them without enough funds to live on, which undermines the purpose and financing of our whole superannuation system,” he added. “This report is more evidence of the urgent need for the Retirement Incomes Review to be comprehensive and take into account the whole range of public policy levers so we can make sure our retirement Incomes system is fair, sustainable and ensures all Australians can live with dignity as they age.”