For many Australians in their 40s and 50s, there is a common assumption that if you work hard, buy a home, and contribute to superannuation, you’ll enter retirement debt-free.
That was certainly the experience of many Australians who bought homes in the 1960s and 1970s.
Today, however, the landscape looks very different.
While property prices often dominate discussions about housing affordability, an equally important trend receives far less attention: Australians are taking significantly longer to pay off their mortgages than previous generations. As a result, many people are approaching retirement with substantial housing debt and may be forced to consider using some of their superannuation to clear it.
The Myth: Home Ownership Has Collapsed
Contrary to popular belief, home ownership itself has not fallen dramatically.
Australia’s home ownership rate rose strongly after World War II and reached around 70% by the 1960s, remaining broadly in that range ever since. In 2021, around 66-67% of Australian households still owned their home, either outright or with a mortgage.
The real change is not whether Australians own homes. The real change is how much debt they carry and how long they carry it.
What Was Different in the 1960s and 1970s?
For many Australians who bought homes in the 1960s and 1970s:
- Homes were significantly cheaper relative to household incomes.
- People typically entered the housing market at a younger age.
- Mortgage terms were generally shorter.
- Extra repayments were often used to eliminate debt well before retirement.
As a result, reaching retirement with a mortgage was relatively uncommon. Most households expected to own their home outright by their late 50s or early 60s.
The family home formed part of a simple retirement strategy: Pay off the mortgage first, then focus on retirement savings.
The Modern Reality
Fast forward to today and the picture has changed considerably.
Research based on ABS data shows that:
- In 1990, only around 12% of Australians aged 55-64 still had a mortgage.
- By 2015, that figure had increased to 31%.
- By 2021, almost 36% of Australians aged 55-64 still carried mortgage debt.
- Among Australians aged 65 and over, the proportion with a mortgage almost tripled from 3.2% in 2001 to 9.6% in 2021.
In other words, nearly one in ten Australians of retirement age is still paying off a mortgage.
Perhaps most tellingly, research shows the median age at which Australians completely repay their mortgage has increased from approximately 52 years of age in 1981 to around 62 years of age in 2016.
That’s a full decade later.
Why This Matters for People in Their 40s and 50s
For Australians in their peak earning years, this trend has significant implications.
The traditional retirement model assumed:
- Mortgage paid off.
- Superannuation available to fund retirement.
- Age Pension providing additional support where required.
Increasingly, many Australians are approaching retirement with Steps 1 and 2 colliding.
Instead of using superannuation solely to generate retirement income, a growing number of retirees are withdrawing significant portions of their super to eliminate mortgage debt.
While paying out a mortgage may provide relief and improve cash flow, it can also substantially reduce retirement savings and limit future income options.
Should You Use Super to Pay Off Your Mortgage?
For some people, entering retirement debt-free may be the right decision. For others, using a large portion of superannuation to clear a mortgage could leave them with insufficient retirement capital.
The correct strategy depends on factors such as:
- Remaining mortgage balance.
- Superannuation balance.
- Age and retirement timeframe.
- Investment returns.
- Expected retirement spending.
- Eligibility for Age Pension benefits.
What is clear is that these decisions are becoming increasingly common, and they often require careful financial modelling rather than simple rules of thumb.
The Key Takeaway
When comparing today’s housing market with the Australia of the 1960s and 1970s, rising property prices tell only part of the story.
The bigger issue may be that Australians are carrying mortgage debt much later in life.
Previous generations generally expected to enter retirement owning their home outright. Today’s households are buying later, borrowing more, and often taking an extra decade or more to become mortgage-free.
For Australians now in their 40s and 50s, the question is “ what do I need to be doing now to ensure that my mortgage is paid off prior to retirement.
At Quinn Financial Planning, we help clients understand the interaction between mortgage debt, superannuation and retirement income strategies. If you’re concerned about carrying debt into retirement, now is the ideal time to review your long-term plan and explore your options before retirement arrives.
Should you require further information on mortgage payments, please feel free to contact Peter Quinn by submitting an enquiry or by calling us on +61 2 9580 9166.
The information in this document does not take into account your personal objectives, financial situation, or needs, so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser