AHURI NEWS

Soaring mortgage debt linked to longer working lives

New AHURI report finds mortgage debt among pre-retirees is linked to longer working lives

21 Mar 2017

A newly published AHURI report, ‘A new look at the channels from housing to employment decisions’, undertaken by researchers from RMIT University and Curtin University, finds that rising levels of mortgage debt may cause workers to extend their working lives in order to pay off their mortgages.

‘We find that those with an outstanding mortgage debt have stronger labour market ties,’ says Professor Gavin Wood, one of the report’s authors from RMIT University. ‘In the 45 – 54 years age group their chances of leaving the labour force are only 19 per cent of outright owners’ chances of leaving the labour force. In the older 55 – 64 years age group the chances of leaving the labour force are 27 per cent of outright owners’ chances of leaving the labour force.’

We find those with an outstanding mortgage debt have stronger labour market ties

While helping to mitigate declining rates of employment and productivity slowdown due to Australia’s population ageing, older households having longer working lives comes with increased risk. The probability that householders leave the workforce due to illness (including carer responsibilities) or forced redundancies increases with age. As a result, older indebted householders are at risk of being unable to meet mortgage repayments if things go wrong. These are hazards that earlier generations of older homeowners were not exposed to, as few if any failed to pay down their mortgage before pension age.

The research report is available to download from the AHURI website at http://www.ahuri.edu.au/research/final-reports/275