How Australians are using their home and mortgage to generate wealth for their future is the subject of a new report released this month by major lender Citibank.
Entitled 'Home as a Financial Tool', the report has identified a growing trend towards refinancing, with 74 per cent of current mortgage holders having refinanced or started a new mortgage term at some point. It also highlights the extent to which many Australians intend relying on their own home to fund retirement.
But while homes are viewed as a valuable source of post-work funding, the other side of the coin shows that 44 per cent of today's mortgage holders think it is likely they will have to fund a mortgage in retirement.
Despite market conditions and difficulties getting onto the property ladder, property ownership is still a primary goal for many. More than one in three (36 per cent) renters, and two in five (42 per cent) people living with parents, characterised themselves as 'first time hopefuls'.
Twenty-one per cent of current mortgage holders plan to boost their retirement nest egg by downsizing to a smaller home, while another 17 per cent plan to increase retirement funds by selling investment property.
The implications for baby boomers, Australia's largest single demographic group, is that they could be attempting to find buyers for their larger properties, at a time when lifestyle changes are dictating a trend towards smaller, more compact homes.
A glut of large homes and a constricted market could mean baby boomers are forced to accept a reduced sale price - resulting in a smaller contribution to their retirement pot. It will also mean a shortage of small to medium size properties as cashed up baby boomers and younger homebuyers face off in the market.
Professor John Piggott, an economist at UNSW who specializes in the economics of ageing, said the next 20 years in the housing market will be interesting.
"In many ways it is an unknown quantity. Baby boomers will be in their retirement, and will not need the large homes they occupied when raising a family," he said.
"On the other hand, the tax and pension advantages of retaining the family home are considerable, and this will discourage trading down. The final wash-up is unclear. Probably, the outcomes will be different in large cities, where population pressures are likely to keep growing, from those in regional centres."
Just as we change our home to suit our needs, it is important to make sure we have the right mortgage to go along with it, Martin Barter concluded.
"These days mortgages can be tailored to suit our needs at each stage of life. Stick with the wrong mortgage and you will be doing yourself a huge disservice, it could mean the difference between having or not having a mortgage in retirement," he said.
