Mortgage debt surging among older Australians

Most Australians think they’ll own their homes outright by the time they retire, but a new report details how mortgage debt among older Australians blew out by 600% between 1987 and 2015.

Most people plan to own their homes outright by the time they retire, but a recent report shows many older Australians aren’t in fact living the dream, finding themselves knee- deep in mortgage debt in their sixties and seventies.

The amount of mortgage debt held by Australians aged 55 and over blew out by 600 per cent between 1987 and 2015, while house prices tripled, according to the Australian Housing and Urban Research Institute’s (AHURI) latest report, Mortgage stress and precarious home ownership: Implications for older Australians.

AHURI warns this growing social and economic problem creates a huge risk that people who cannot keep up with their home loan repayments will be forced out of ownership and into the private rental market later in life. Alternatively, in a bid to stay in their homes, they may look to their super balance to pay their mortgage, digging into much needed funds to support retirement.

Australia’s policy settings for retirement income assume most will own their home outright by the time they retire, said one of the report’s authors, Professor Ong, who added that is no longer the case.

What can be done?

UNO’s Household Financial Waste Report found one of the biggest hidden drivers of household financial waste in Australia is home loan interest, on which Australians are wasting an estimated $4.2 billion each year.

CommBank’s Connected Future Report, released a few years ago, found that first home buyers generally enter the market at 32 years of age – a figure that has remained unchanged for 20 years. UNO’s own data reveals that the average age of customers who refinance is 46. That’s a gap of 14 years between buying a home and refinancing it – and 14 years of potential lost savings.

“It’s important to check your loan every few years in order to make sure it’s still the best one out there for your circumstances,” said UNO chief executive, Anthony Justice, adding the sooner people can pay off their loans, the less likely they’ll find themselves with a mortgage in retirement years.

“Rising or falling best home loan rates, changing property values and new products entering the market can all impact how well a loan is performing. Many Aussies are simply turning a blind eye and paying more interest than they need to be,” Mr Justice said.

The importance of checking your rate

While people refinance for different reasons, one reason is to get a better rate which in turn means paying less interest over the life of the loan. As an active home loan manager, UNO can keep an eye on the market for you and let you know when it’s time to consider refinancing.

UNOs’ loanScore technology analyses the market daily to check customers’ loans against thousands of home loan products. UNO then alerts customers when their potential savings hit their chosen threshold and, with their approval, can renegotiate with the customer’s current lender or switch them to a better deal.

UNO loanScore customers who’ve already used the service, are getting a median 1 year savings calculated at $2,000, and a median 3 year savings calculated at $5,200. UNO data shows while 32% of customers could save by staying with their current lender, 95% of customers could save by switching to a different one.

UNO customer Amy recently saved $45,000 over the life of her loan, by switching to a better rate with one of the lenders on uno’s panel.

“By letting us keep an eye on your rate – and letting you know when you could switch to a better one – Australians could save thousands each year,” said Mr Justice.

At UNO, we’re excited about the possibility of fighting home loan waste. We believe in giving the consumer the power, so they have the option to pay the least interest possible over the life of their loan so they can enjoy their hard-earned income to the maximum.

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Mike Vincent
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Andrew is the best broker I have worked with and one of the few people who understands the investment journey from both a personal and professional standpoint. Andrew is an asset to anyone from a first home buyer to a seasoned investor.
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Scott Wilkinson was my broker last year when I sought finance for a new property investment and refinance for my property port folio. He was an absolute delight to work with. He was always professional, on time and always available to talk at a moment's notice to discuss my credit options and give well considered advice; usually this was very much after-hours due to my work commitments during the day. He was always happy to talk. I had not used a mortgage broker in a long time opting to do the re-financing myself. This was primarily due to disappointing experiences I'd had with mortgage brokers in the past. However with the increasing complex nature of dealing with credit providers, I could see that I needed a good advocate to act on my behalf for this particular refinance. In all honesty I did not hold much hope that in the current credit environment I would be able to secure the finance I required for the new property investment I was wishing to secure. Scott found a way however and was able to secure the finance along with the refinance of my portfolio. I have since referred friends to Scott and I know they have been very happy with his work. He is ideal for property investors who have busy day-jobs and need someone who understands property investment strategy and is able to tailor credit advice and options to their needs. Scott provides this advice and information in a way that is clear and concise. He kept me up to date continually during the application process. He made what could have been a very stressful and frustrating process easy and straightforward. I could not recommend Scott and the team at UNO Home Loans more highly. They are all a delight.
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