Home loans for over-65s now at $23b

There’s been a ‘‘frightening’’ increase in the size of home loans held by people aged over 65, and a rise in the use of reverse mortgages to clear them, credit reporting bureau Centrix says.

There are now 134,000 mortgages on which money is owed by borrowers aged over 65, up from 118,000 in June 2018.

‘‘What’s frightening is how much the value of mortgages has moved in the past five years,’’ Keith McLaughlin, Centrix chief executive, said.

In June 2018, over-65s owed $16.9 billion on their homes, but that had risen to $23.4b, and the average owed had gone from just over $143,000 to nearly $175,000.

Exactly why there has been such a run-up in over-65 mortgage debt is a matter of speculation, but McLaughlin said individual reasons for carrying debt past 65 would be varied.

They would include life events like divorce throwing people onto tougher financial tracks, people who had used their homes as security for an investment property, or those who had extended their home loans to help their children on to the property ladder.

‘‘The bank of mum and dad is a big one,’’ McLaughlin said. ‘‘People top up their mortgages to help the kids.’’

Whatever the reasons, a rising number of retiring people are turning to reverse mortgages to pay off their home loans.

A reverse mortgage allows people to borrow against their homes, but only repay the loan and accumulated interest when they eventually sell the property.

Heartland Bank, which has the largest reverse mortgage business in the country, said over the last 15 years, it had seen a 55% increase in the proportion of reverse mortgages being used to repay debt.

Andrew Ford, general manager of reverse mortgages at Heartland Bank, said downsizing to a smaller home was a strategy available to homeowners who still had debt after the age of 65.

But many were choosing to ‘‘age in place’’, and taking on reverse mortgages to pay off the rump of their home loans.

Ford said people using a reverse mortgage to repay a home loan often also took out a larger loan in order to provide cash to supplement NZ Super payments.

‘‘The way we retire is changing, and the increasing proportion of Kiwis who are going into retirement with debt is evidence of that,’’ Ford said.

He said nearly one in five people were reaching the age of 65 with money still owing on their homes.

Many people continue working past the age of 65 at which they qualify for NZ Super.