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Mortgage-Free Goal Slipping Away

Media release
24 May 2006

Mortgage-Free Goal Slipping Away

Sobering findings from research in Australia by Citbank into the status of mortgage holders could have implications for New Zealand’s older citizens.

“Home as a Financial Tool”, a recent survey by Citibank into home ownership and mortgage trends, shows that not only diamonds are for ever, but increasingly, mortgages too.

The research shows one in three Australians expect they will still have a mortgage in retirement.

“While we don’t have the local figures, we presume there will be a similar profile in New Zealand,” says Richard Coon, Managing Director of home equity release specialist Sentinel.

“Like New Zealanders, Australians have always had a strong ethos around paying off a mortgage prior to retirement. Yet the results of this survey show that two in five (44 percent) of current mortgage holders felt it likely they would still be paying a mortgage when their working days are over, potentially making mortgage a cradle to the grave proposition.

“And one in five over-55s in Australia expect to be repaying a home loan post-work.”

The research figures show this figure rising dramatically in younger groups with almost half of the 18 to 44-year-olds expecting to have a mortgage in retirement.

“The problem with this is that once you no longer have a salary coming in, meeting mortgage payments, along with all the additional expenses that come with older age, can become increasingly difficult. And while they may be sympathetic to the retiree’s position, banks nevertheless need to have their mortgage payments met,” Mr Coon says.

He believes a growing number of people will find a solution to this dilemma in home equity release.

“While they may still have a mortgage, most people in retirement will have a good proportion of equity. Therefore they can use home equity release to access a Lifetime Loan and pay off their mortgage with the bank.

“This means they no longer have the burden of repaying the interest and yet can continue to live in their own home as long as they want or are able.”

Mr Coon says that while in an ideal world, everyone would have a mortgage-free home and sufficient funds to enjoy their retirement years in comfort, research such as that undertaken by Citibank indicate people are going to have to take a different approach to funding their later years.

“I believe home equity release will play an increasingly important role for many seniors, both in New Zealand and Australia as it is already doing, and has done for a number of years, in the UK.”


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