Boomers spending kids’ inheritance

Baby boomers are spending about $1 billion a year of their children’s inheritance by gradually cashing in the equity in their homes through reverse mortgages, according to a new report from independent data and analytics company Illion.

Mortgage Nation: The Great Australian Debt analyses the banking and mortgage records of almost five million Australians, making it one of the “most detailed and credible in the country”, according to Illion.

“While Australians aged over 71 years have $30.1 billion in home loan debt,” the report says, “$2.6 billion of this has occurred in new loans over the last two years alone.

“For a typical 25–30 year loan, this means these new 70-year-old-plus mortgage holders will need to work until 100 years of age before paying off their mortgage entirely.”

However, the report says it’s more likely that asset-rich and cash-poor baby boomers are converting equity from their homes into cash for a better lifestyle in retirement.

“Known as ‘reverse mortgages’, the debt is taken out of their estate when they die,” it says. “What this essentially means is that at the current rate of new borrowings, baby boomers are spending $1 billion or more every year of their children’s inheritance.”

The report notes the rise of asset-rich, income-poor retirees who bought a ‘cheap’ house many decades ago, but in retirement have inadequate superannuation savings. More and more of this cohort is now drawing on this equity.

It also notes the growing influence of the bank of mum and dad. “It is likely is that some baby boomers are putting their names on mortgage documents to act as guarantor to their children – giving rise to the ‘Bank of Mum and Dad’ – and in some cases, even the ‘Bank of Grandma and Grandpa’.”

In YourLifeChoices 2019 Retirement Matters Survey, 72 per cent of the 4315 respondents said they intended to leave an inheritance.

In the same survey, 85.4 per cent said they would not consider taking out a reverse mortgage on their property.

The Illion research (graph above) found that Australians aged between 30 and 50 have the biggest mortgages, dispelling the myth that first-home buying millennials are the most disadvantaged generation financially.

“Despite the widespread belief that first-home buyers in their 20s with small deposits are the most indebted group in the country, it is actually generation X, aged between 30 and 50, which is enduring ‘peak debt burden’,” said Illion CEO Simon Bligh.

“On the other hand, baby boomers are spending up to $1 billion a year of their millennial children’s inheritance.”

Surprisingly, older men are continuing to pursue the great Australian dream of home ownership well past the traditional retirement age of 65. In fact, a staggering 27 per cent of all mortgages in the over 70 age group are for single males, the report says.

Mr Bligh said Australia’s property market was worth a staggering $6.6 trillion, easily outstripping the value of the $2.9 trillion compulsory superannuation system and the $2.2 trillion share market.

“Australia’s property market is crucial to the economic prosperity of Australians,” he said.

“However, our homes are among the most expensive in the world, with Sydney and Melbourne ranking in the top five cities globally for housing unaffordability.”

Australia’s population of 25 million people live in 10.3 million homes, worth a collective $6.6 trillion.

The country is building about 180,000 new homes a year, or 15,000 a month.

Of these properties, six million have mortgages against them, worth a collective $2.1 trillion. Key findings included:

  • Relationships, or friendships, remain the most popular pathway to home ownership in Australia, with three in every five home loans owned jointly by a male and female.
  • Almost 40 per cent of mortgages have been taken out by a single borrower. Twenty-one per cent are single males and 16 per cent are single females.
  • Sydney is the female financial liberation capital, with five of its suburbs having the highest rates of single female home ownership of anywhere in the country.
  • In comparison, the top five Australian suburbs where men go solo are shared between Perth, Sydney and Melbourne.


Do you have a reverse mortgage or are you considering a reverse mortgage? Are you surprised by the number of older Australians who have taken out reverse mortgages?

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Written by Janelle Ward

Energetic and skilled editor and writer with expert knowledge of retirement, retirement income, superannuation and retirement planning.

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