Economist Saul Eslake says retirees are having to use their superannuation to pay off mortgages.

The independent economist Saul Eslake has produced a report titled, “No place like home: the impact of declining home ownership on retirement”, available here in PDF form.

It highlights three trends which have emerged over the past two decades:

  • first, declining rates of home ownership among people of working age, especially those in their late twenties and early thirties
  • second, among those who have attained home ownership, declining rates of outright ownership – that is, having fully paid off their mortgage – and, conversely, a rising proportion of home owners, particularly among those in their late fifties or early sixties, who still have mortgage debt outstanding
  • third, a declining proportion of people aged 65 and over living in accommodation rented from State or Territory housing authorities, and conversely, an increasing proportion of people aged 65 and over living in private rental accommodation, for whom housing costs represent a higher-than-average, and rising, proportion of total income

If these trends continue – and Mr Eslake thinks that they will – then it is likely that:

  • an increasing proportion of new retirees will use some or all of their accumulated superannuation savings to discharge their outstanding mortgage debt, meaning that a higher proportion of retirees may remain wholly or partially dependent on the age pension than currently assumed
  • an increasing proportion of retirees will be living in privately rented housing, spending a higher proportion of their income on rent, potentially generating political pressure for increases in the level of Commonwealth Rent Assistance, in the age pension itself, or both