Rising Mortgage Debt Poses Challenges for Retirees

More Australians are heading into retirement with mortgage debt, struggling to balance loan repayments with their financial future. As home prices climb and 40-year loan options become available, first-home buyers are getting older, and debts are lasting longer, creating financial pressure for retirees.

Over the past decade, the percentage of homeowners aged 65-74 still paying off a mortgage has jumped by 44%, now covering 13.4% of this age group. The trend is even stronger for those aged 55-64, with 43% still holding a mortgage - up 37% in ten years, according to recent analysis.

High property prices, delayed home ownership, and financial setbacks like job losses, divorce, and the pandemic have contributed to this issue. Many Australians have also tapped into their home equity, extending their loan terms well into retirement.

Some lenders are now offering 40-year mortgages to make repayments more manageable, but financial experts warn that while lower monthly payments may seem appealing, they result in significantly higher interest costs over time. A borrower taking a 40-year loan on $600,000 at 5.99% interest could pay over $240,000 more in interest than if they had chosen a 30-year term.

To avoid the pitfalls of long-term debt, financial specialists recommend making extra repayments early, refinancing when possible, and planning mortgage repayments with retirement in mind. With more retirees carrying debt, managing loan terms and repayment strategies has never been more crucial.

Source: The Australian, First Links, ABC News