Rising Interest Rates Hit Older Australians with Record Levels of Housing Debt

Housing debt among Australians aged 55–64 has more than tripled over the past two decades

Older Australians are bracing for a wave of financial pain as rising interest rates and higher petrol prices intensify pressure on a demographic already carrying record levels of housing debt into retirement.

Rising interest rates are exposing a structural fault line in Australia's housing and retirement systems, with a growing cohort of older homeowners now carrying housing debt well into their 60s and 70s.

The Reserve Bank of Australia (RBA) has recently lifted rates twice in the past two months (February and March), bringing the cash rate to 4.1 per cent, up from 3.85 per cent. This follows the recent State of the Older Nation report which revealed that one in four Australians aged over 50 is living in poverty.

RBA research shows that many Australians who borrowed during the low rate era have seen their debt repayments rise by 50–70% as interest rates climbed from pandemic lows.

Homesafe Wealth Release CEO Dianne Shepherd said Homesafe was now seeing increased interest from homeowners who were confronting the reality of entering retirement with significant debt.

"Many older Australians have exhausted their buffers and now they are facing rising interest rates and cost of living pressures as they enter retirement with a limited income," Shepherd said.

"We are entering an era where a debt free retirement cannot be assumed and is likely to be the exception. Older Australians need alternatives to manage debt commitments without needing to sell their home."

ABS data shows a long-term structural shift where housing debt among Australians aged 55–64 has more than tripled over the past two decades, while the proportion of people entering retirement with a housing debt has doubled.

Shepherd said using a debt free equity release solution to access the wealth stored in the family home to pay off housing debt is emerging as a popular alternative for older homeowners.

"A large proportion of older Australian homeowners are asset-rich, but cash-poor," Shepherd said. "Their wealth sits in the family home, yet when they would like to retire many are still carrying housing debt and face ongoing financial pressure."

"They have worked hard, raised families, paid taxes for decades — and now they are facing the very real possibility of entering retirement with housing debt they simply can't service."

The issue is now shaping as a major policy challenge as Australia's population ages and the financial system adapts to a generation retiring with unprecedented levels of housing debt.

Australians aged 55 and over now hold more mortgage debt than any previous generation at the same age. This is being driven by longer loan terms, refinancing arrangements, marital breakdowns, and equity withdrawals during the pandemic boom, which pushed many borrowers to take on larger loans.

Many older homeowners have delayed retirement and have no choice but to stay in the workforce to keep up with repayments.

Shepherd says debt free equity release is increasingly helping older Australians stay in their homes while eliminating housing debt.

"People want stability and equity release solutions gives them a way to stay in the community they love without the burden of ongoing repayments," Shepherd said.

"We're entering a new era where a debt-free retirement cannot be taken for granted. Older Australians need safe, reputable pathways to manage debt commitments, without sacrificing their financial stability or independence."