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Retirees facing pressure from higher cost of living and increasing debt in retirement


We’ve been hearing a lot of discussion lately around cost of living increases and the pressure this is placing on Kiwi families. Among the most affected by this crisis are retirees, many of whom are trying to get by on NZ Super alone, which is typically only enough to cover the essentials and nothing more. Higher food and energy costs can create some tough choices for older Kiwis – if the cost of a tank of petrol goes up by $30, for example, something else has to give.

Why does it feel so hard?

The increasing proportion of Kiwis aged 65+ who have entered retirement with debt is one factor which many people don’t realise is compounding the cost of living pressures, as it can be a struggle for older Kiwis to make repayments if they’re not still working full time.

According to credit reporting bureau Centrix, the number of mortgage holders aged 65 and over increased by 17.2% between 2017 and 2022, with nearly 1 in 5 Kiwi pensioners still managing a mortgage into retirement. This data mirrors the experience at Heartland over the last 15 years, where we have seen a 55% increase in the proportion of reverse mortgages being used to repay debt.

What is the solution?

Of course, the seemingly obvious solution is downsizing and paying off the mortgage. However, more and more Kiwis are wanting to retire in the comfort of their own home. In fact, 90% of respondents to a recent survey agreed it’s important to them to be able to age in place, surrounded by their friends, family and community connections.

The good news is, although the proportion of Kiwis retiring with debt has increased, so has the average property price (and by quite a lot), meaning in general homeowners actually have greater equity in their homes. With a reverse mortgage, homeowners are able to release some of the equity in their home to consolidate their debts and cover the increasing cost of living, with no need to make regular repayments or leave their home and community.

Reverse Mortgages in the news – Learn more about why over 65s are taking out a reverse mortgage.

A great example of how a Reverse Mortgage works

We’ll share with you a great example of why one of our customers chose a Reverse Mortgage. Let’s call her Jane*, a 75-year-old lady with a lovely home in Blenheim, worth $550,000. She loves her home and the neighbourhood, but was under financial and emotional strain trying to make her fortnightly loan repayments. She decided to use a Heartland Reverse Mortgage to repay her home loan and a little bit extra for some day-to-day expenses, plus she took out a Cash Reserve Facility (like a line of credit) for future needs.

Jane said that managing the fortnightly repayments was “very, very difficult. I was going backwards every week”. She went on to say that no longer having to make regular payments “is wonderful”.

The way we retire is changing, and the increasing proportion of Kiwis who are going into retirement with debt is evidence of that. What’s important is that people have options and can choose what’s right for them – and for some, a reverse mortgage can be a great way to relieve the pressure of making loan repayments and allow retirees to actually enjoy their retirement.

* customer name changed for privacy reasons.

Applications are subject to loan approval criteria. Heartland Bank Limited’s responsible lending criteria, fees and charges apply.

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