Retirees may drain super to pay off home loans as rate hikes bite

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Working your whole life to own a home – only to spend retirement mortgaged to the hilt – is a ... Read More The post Retirees may drain super to pay off home loans as rate hikes…

An increasing number of retirees will turn to draining their super to pay off mortgages. Pic: Getty Images

They are the forgotten demographic caught in the crosshairs of rising interest rates and falling house prices: retirees still stuck with a home mortgage.

And with five hikes to interest rates building to a crushing financial burden, there is now hard evidence that older Australians are being compelled to escape the mortgage trap using everything at their disposal, including running down their superannuation.

The pattern is clear from the latest figures released by the credit agency Equifax, which shows refinancing activity is most common among older people.

For retirees, mortgage interest payments are not just a niggling concern; they are an outsized item in the household budget.

A recent report from the Australian Housing and Urban Research Institute put mortgage repayments as the single largest expenditure item within older mortgagors’ budgets, representing a one-third share.

For some retirees, paying off the mortgage will mean cutting into their super savings. For others it means selling the home and moving into a rental.

“Older mortgagors seem prepared to run down their superannuation to bolster wealth stored in home equity when repayment risks are present,” the AHURI report says.

For lower-income retirees, the housing shock will mean increased reliance on social welfare. In fact, the demand for Commonwealth Rent Assistance is already projected to rise by 60%, from 414,000 people in 2016 to 664,000 in 2031.

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