Lifestyle and helping the kids: Why more Kiwis retiring with home debt

They don’t expect you to fully repay your loan in your working life these days which is useful as long as you have

an exit strategy. John Bolton, managing director of

Squirrel Mortgages

Kiwis are getting their first mortgage later in life and a growing number are carrying that debt into their retirement years.

The average age at which Kiwis take on their first home loan has risen from just over 31 years old to 36 since 2012, research by credit agency Centrix shows.

Nearly one in five over-65s still has a mortgage — an age where many are contemplating winding up their working lives.

Mark Rowley, Centrix chief operating officer, said in the past 10 years the median house price in New Zealand had nearly doubled, rising from $350,000 to $685,000.

“This has resulted in people needing to save larger deposits and entering the housing market later in life. This, combined with larger mortgages, means these loans are going to take longer to pay off.”

Its data shows 135,000 of the 791,000 New Zealanders aged over 65 have a residential mortgage and the number has increased by 16 per cent in the past three years. “It’s likely this trend will continue into the future as house prices continue to rise,” Rowley said.

About 12 per cent of all residential mortgages belong to people aged 65 and above and the average size of the debt is $155,555.

“Unsurprisingly most superannuitants with a mortgage are in Auckland [29 per cent], where the median house price just hit $1 million. Auckland is followed by Canterbury [13 per cent], Wellington [ 10 per cent], Waikato [ 9 per cent] and the Bay of Plenty [7 per cent].

“By contrast Southland, Gisborne and the West Coast [have] the lowest number of over-65s with a mortgage.”

Rowley said it was surprising so many over-65s still had a mortgage and he said there could be several reasons for it.

For some the mortgage could be sitting there but not drawn down as a convenience measure in case there needed to be future borrowing. “But we are also thinking that there are a number where the bank of mum and dad come in.”

He said parents could be using the equity in their home to lend a deposit to their children to help them buy a house.

But John Bolton, managing director of Squirrel Mortgages, said most of those funding children into a property were in their mid 50s, not 60s.

“Banks don’t like older parents guaranteeing their kids or borrowing for their kids.”

Bolton said he was seeing increasing levels of debt with the over-65s, a lot of it driven by lifestyle choices.

“We are dealing with one at the moment where they have a reasonable level of equity but they want to build a new lifestyle property. They will be continuing to service that [mortgage] until they are in their 70s.”

He said partly it was because people were working into older age to 70 or 75, at least on a part-time basis.

“So they can afford to carry some level of debt at that age.”

Bolton said the rising cost of property was more of a driver and the banks had also softened up a bit when it came to lending to older borrowers.

“They don’t expect you to fully repay your loan in your working life these days which is useful as long as you have an exit strategy.”

He said that meant he was having more conversations with people about what the next step in their plan was.