Boomers spending kids’ inheritance

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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

70 Comments

Total Comments: 70
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    “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.”

    This statement is grossly overstated. The total drawdown on reverse mortgages, home reversion schemes and any other form of seniors equity release is $4000-420m per annum

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    What are they talking about it is not the kids inheritance it is their money . The baby boomer worked hard for the money they have all rights to spend it on themselves. enjoy do what ou want and if there is any left the kids might luck

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      Agree Dave. Until we die, our kids are not entitled to anything. This sense of ‘entitlement’ to Mum and Dad’s hard-earned money seems to be pervading society. Our Last Will and Testament states how we want our assets to be distributed. Unfortunately the current laws allow family and others who feel ‘entitled’ to make a claim against that Will, meaning the wishes of the newly deceased person may not be respected. Most baby boomers have worked really hard for what they have, with home ownership the pinnacle of goals. They’ve gone without 5 bedroom 3 bathroom houses, new cars and top of the range furniture and annual overseas trip to achieve that goal. They were lucky to have a camping holiday to the beach for a week or two each year. If they choose to downsize and spend the money enjoying their final years or accessing great health care, that’s their right. The kids should only inherit if the parents wish them to.

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      Dave, it would only be the adults that were spoilt as children with such an attitude.

      I bet those same adults/children have never helped their parents out during times of need.

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      Agree Dave. My children are better off than my husband and I were when we were their age. I did not expect anything from my parents as I knew they grew up during the war and worked hard during their lives and went without.

      My children and their families have had more holidays, seen more shows, eaten out more frequently than I have ever done in my entire life. On my low income, it is hard enough to save up for a holiday these days considering the increasing cost of travel, accommodation and the everyday living expenses of utilities, rates, food, petrol, maintenance repairs, etc. not to mention health insurance and health rehabilitation costs.

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      Totally agree with you Dave. Those words jarred with me also. It is our money and we will do what we wish with it until we depart this mortal coil. I read where one man told his daughter that he and the wife were thinking of buying a four wheel drive and caravan and doing the grey nomad thing….reaction from daughter “you are spending my inheritance”. That was a red rag to a bull..the father bought the best outfit he could afford.

      There is no way breathing this household is going to begrudge ourselves a thing now..we have what we want and spend what we want. There will always be something left and whoever gets it ought to be grateful they got anything.

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      My thought entirely. Calling it ‘spending the kids inheritance’ shows just how entitled people have become.

      Spend away I say. You earned it! If there is anything left bequeath it where you wish. Until then the kids can keep their fingers to thenselves.

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      One of my kids came back & had over 2 years free accommodation & electricity in my self contained granny flat, a long while after they had left home. Another is getting the same for over 4 years, & is still there.

      I think the pair of them have had their inheritance already, so I am wondering if I should shout myself an XK150S Jaguar, an E type, or a yacht.

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      Agree 100%. YLC should be ashamed of putting such a header on any article.

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      some sensitive types on here … nobody disputes it is the boomers’ choice to spend their wealth however they see fit but the fact remains money spent is not available for inheritance when the boomers shuffle off this mortal coil. Life is too short to be among the perpetually offended over something so trite as phrasing.

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      Farside, he problem is the “expectation” that kids have today.

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      My siblings and I said to our parents that they should spend the money they had accumulated during their lifetime, and spend it they did!! We were left with a house in the country (more than 30 years ago) and a small bank balance. Split between 5 of us it was not much, however the money that I received went straight into our superannuation. None of us complained that there was not much inheritance.

      Now our three children say to us spend your money that you accumulated, however they will be very happy to inherit whatever is left. Hopefully they will put that money into something that will continue to be a growing asset. Perhaps a third generation of asset accumulation whilst still having fun in retirement.

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      This is just another example of creating the generational divide. We’re idiots if we fall for it.

      Most of us did it hard when we were young – like everyone else. Nowadays, there is a REAL DIVIDE between haves and have nots, whether they are young or old.

      Remember, we had free university education and cheap rents while we saved up for a deposit for a mortgage.

      I agree – there are many people who feel entitled to things, and they are both young AND old people.

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      Hyperbole, if kids today have unrealistic expectations (yes. it’s a sweeping statement) then who is at fault – them or the parents that raised them to have the expectations?

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    If you are fortunate enough to have a house which can be used for a reverse mortgage, then using it to raise capital for home maintenance – as I have had to do – is a godsend. Otherwise we’d be living in unsafe houses, or having to sell at a loss and then cast ourselves upon the rental market – a prospect too awful to contemplate. And the house tends not to depreciate in value so it’s a good way of surviving when the pension is all the income you have.

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    We constantly tried to get my father to travel Australia in his later years. It was something he had always talked about but never did. We have warned our kid’s there will be the house when we die, but very little money. We intend to travel Australia and the world for as long as we are healthy enough to do so.

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      Well do it sooner than later. My father always wanted to travel the Trans-Mongolian- Siberian Railway, talked to Mum about it but not too me. Would have taken him along when I did. People have wishes but always seem to wait till it is too late. Leaving the kids the house is generous.

    • 0
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      Colinus, put your travel on hold while this Coronavirus is sorted out.

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      were going on a cruise but holding off now. have always told people if going on cruise get a balcony because if you get sick or something like coronvirus happens you are stuck in an inside cabin with no windows at all….I would go nuts. well worth the extra money to have access to open balcony and fresh air.

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      @hyperbole – always book a balcony cabin ourselves, we like fresh air, been round the world in balcony cabins, cost almost twice as much as an inside but then how many times do you do cruises like that?

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    “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?”

    To answer the questions put, we do not have a reverse mortgage nor do we plan to take one out and, hopefully, will not need to take one out in the future. The second question is really none of my business.

    The group of current retirees grew up in a different world to their children. A lot of us had to leave school early because further education was not able to be financed by the family. It was also accepted that parents would try and leave something for their children when they passed away. Retirees, in a lot of cases, have been able to support their children through higher education, cadetships or apprenticeships to give them a better start and the sacrifice of parents was at that stage in life. Now it’s our time and we can choose to spend our savings or deal with our assets in a way of our choosing. Sure, this is a generalisation but the fact remains that we are the first generation to not worry about leaving something for our children, hence the SKI trips. We are living longer and if our children haven’t attracted some assets by the time we go then they will probably splash their inheritance against a wall so why shouldn’t we do it for them.

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      Agree Horace, that by the time we meet our maker, a lot of our children will be in the ‘grey brigade’ too. If they haven’t amassed sufficient assets then by hard work and good savings, it is likely they would blow this ‘entitled inheritance’ very quickly. Yes, a lot of us have spent a fortune supporting our children through higher education and often, bought them their first car, paid for study related trips interstate and overseas and then provided the deposits for their homes. Most of us did not have these supports or opportunities. Now we have the time and hopefully the money to enjoy what so many of our younger folk take for granted.

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      Reverse mortgages only work in salubrious suburbs in capital cities. No chance for us country town dwellers.. We downsized before pension age so we had spending money to see the world – no complications with pension considerations. I was afraid that large houses would some day be included in the asset test.

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      Spot on Horace. The things some Baby Boomers go without so they can leave a decent inheritance to their kids apart from the house are just the things their kids will spend up on, new cars and overseas holidays.

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    Also and importantly many of the Baby Boomer generation is financially helping their children get a deposit together for a house. Our parents didn’t have the finances to do it for us as many didn’t have superannuation. We worked hard and saved to get where we are in older age. We all have to struggle …. that’s life.

    • 0
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      Spoilt children became ungrateful, selfish and demanding adults.

      Many Babyboomers help out their parents too.

    • 0
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      Many younger people help their parents, too. You can’t make sweeping statements because it isn’t the case across the board.

      I too, think spoilt people become ungrateful, selfish and demanding. If we don’t have to work hard for something, we never understand the sacrifices made to achieve something good. But we had plenty of opportunities like free university education, fulltime jobs for life and cheap rents while we saved for a deposit for a mortgage. It is SO DIFFERENT for young people these days – don’t ignore the problems they face. These problems are very real.

  7. 0
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    Interesting how so many state that they wouldn’t take out a reverse mortgage on an asset with the capacity for capital growth, yet so many of them will downsize into a retirement village and see the capital base disappear over there period of occupancy. Then becoming increasingly dependent on the taxpayer to fund in-home or residential aged care. The government and the aged care royal commission turned their back on examining this aspect of funding for aged care.

  8. 0
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    *laughs* It’s not their ‘children’s inheritance’ until those children inherit it – and it is the inheritance right of the ‘boomer’ to spend his/her money in any way he/she chooses… that’s his/her inheritance from a lifetime of often hard work with scarcely any of the fine ‘conditions’ applying today…. and coincidentally building this modern Utopia of a society along the way (along with government installed faults such as permanent unemployment etc – NONE of which are the fault of the Boomer).

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      As for reverse mortgages – wouldn’t couch one with a moonshot length barge pole. It’s another form of ‘eating your equity’ – self-cancering the equity in your life that you’ve generated through decades of effort in countless ways.

      Only a well-off person would consider it the ‘duty’ of the peasants to eat their own homes in this way, the well-off person not being affected, of course.

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      A well-off person would not have to look over the shoulder at C/Link to consider pension payments.

    • 0
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      “to eat their own homes”… seriously?

      Who cares as long as you get lunch and don’t go hungry? Its not like you will need it after you’re gone. The kids can have the crumbs that are leftover after you have eaten.

    • 0
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      You do not understand what is this ‘allegory’? Hokay …

  9. 0
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    This makes me angry – we are not spending the kids inheritance, as though it is a god given right us seniors have to leave them something. What ever any senior has is THEIRS, to do with as they wish. There is absolutely no obligation, necessity or requirement to leave anything to the kids. Or to anyone.
    If you want to spend your money any way you want, then do so, without guilt. I am sick of being put on this guilt trip because we own our home, or have worked our butts off and have some savings, so can enjoy what we want to do.
    If I could, I would do my absolute utmost to ensure I spend my last dollar the day before I am put in the box.

    • 0
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      and nobody is disputing it is your right to “spend my last dollar the day before I am put in the box”. It is clearly your choice whether to spend the inheritance, give your assets away, bequeath your estate to the cat society or leave crumbs for your family.

  10. 0
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    I’m surprised at the number supposedly taking a reverse mortgage. I would only consider one if there was no other choice, certainly not to fund holidays etc. like others, I resent the idea that we are spending the kids inheritance. Gone are the days when retirees spent their final years sitting in front of the TV. I won’t be made to feel guilty for enjoying the rest of my life while health is good. The kids will get the house if they are lucky.

    • 0
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      If I was a single person no dependents low on funds but had my own home I would reverse mortage…who cares when you die what is left…spend it on yourself

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