A new study by the Australian Housing and Urban Research Institute (AHURI) titled, ‘Mortgage stress and precarious home ownership: implications for older Australians’, shows that the burden of mortgage debt is leading to worsening mental health outcomes for older Australians. Along with decades of increasing house prices comes decades of increasing household debt. Although the property market has been falling in recent times, obviously, the debt remains.
Unfortunately, the Australian population is ageing. This graph shows the demographic projections by age range of seniors, 2016 to 2031. Due to lower birth rates and higher standards of healthcare, the proportion of older Australians is steadily increasing.
The study found that since the late 1980s, mortgage debt for older Australians has blown out by 600%. Real house growth lagged behind only increasing by threefold over the same period, while incomes have only doubled.
Older Australians’ mortgage debt to income ratio has tripled from 71% to 211%. This increases the likelihood of repayment risk and mortgage payment difficulties.
Mortgage payment difficulties lead to decreased mental health scores for both males and females — females more than males. The study also showed that psychological distress scores went up for men facing late mortgage payments.
But one statistic I found particularly worrying is that with current trends, over half of all 55-64 year-olds will still be paying off a mortgage in 2031. This is up from 36% in 2016. Only 23% will own their home outright. That’s pretty disturbing.
Curtin University’s Rachel Ong, lead author of the study, commented on the findings.
“These statistics are quite shocking. More and more older Australians are finding it increasingly difficult to pay off their mortgage debt before they retire. Our research shows that if you are carrying a mortgage debt and having difficulty repaying it in later life, then your mental health is likely to be poorer than someone who does not have this issue.”
69-year-old Beverley Baker, chair of the Older Women's Network of NSW, is one of the growing number of older Australians who are still paying off their mortgage. In her role, she meets many older ladies who, due to relationship breakdowns, are struggling to pay back the mortgage. She said,
“It's depression. If you ask anybody, they're depressed. There has to be better ideas than this hard mortgage grab… buy sell, buy sell culture that we are in. A home is not an asset — a home is a need. You know you have wants and needs? It's a need.”
Ms Baker had to get a mortgage in her 50s due to a relationship breakdown. She commented on these pressures.
“I still have eight years to go on my mortgage. Fortunately, I have a job that I love and a board that still likes me and is happy to have me work for them. Taking a mortgage on at 52, it's a different ballgame. I'm not expected to work until I am 77, but that's the reality — I have to work until I am 77.”
The study also found that by 2031, there will be a 60% increase in demand for Commonwealth Rent Assistance, increasing the budget cost from $972 million in 2016, to $1.55 billion in 2031. For people aged 55 and over, the unmet demand for public housing is expected to rise by 78%.
Rachel Ong commented,
“Governments can expect that will create quite a lot of pressure in terms of the amount of funds that they will have to divert to the aged pension system. When I saw these numbers, I actually felt quite insecure myself. I felt insecure about my future, because like many other Australians, I am someone who would be looking at carrying mortgage debt for quite a long time yet.”
Ms Baker pondered on what would happen if she could no longer work and had to sell her house. She said,
“Yes, I would get a lot more than I paid for it, but that doesn't give me a home, and it doesn't ensure that I could replace my house if I could no longer work and couldn't pay the mortgage. Where I live, I would never be able to stay there — to have my friends around me; to have easy access to the train station — I'm two minutes from the station. Those things are really important as you get older in life.”
What are your thoughts on this new study? Are house prices increasingly hurting our elderly citizens? Or are house prices just hurting everybody? Have we let greed rule the roost in Australia and stuff anybody who dares question the status quo? Has Australia just become a greedy and mean society?
#australianeconomy #houseprices #pensioners
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