More and more Australians are delaying retirement as the dream of home ownership becomes a nightmare at the end of their working life.

The number owning their home outright has halved in the past 20 years, census data shows, while the proportion of over-65 households with a mortgage has more than tripled.

Home price increases have outstripped wage growth for decades, delaying the average age of home ownership and leaving some with mortgage debt greater than their superannuation nest egg at retirement.

“We’re going to see this continued pressure on people working for longer because the next generation, their mortgages are even bigger than the last generation,” Digital Finance Analytics founder Martin North said.

“There is an increasingly large cohort of people who are still sitting on very large mortgages in retirement and that has been building.”

Housing costs were by far the leading reason over-60s contacted the National Debt Helpline’s chat service last financial year, with one in three users feeling the pain from mortgage payments, council rates, rent or strata costs.

The number of households delaying retirement because of their mortgage liability tripled to 51,000 in the past five years, according to North’s data.

Australians are also borrowing against their home to pay for renovations, trips or giving their children a boost into the housing market via the ‘bank of mum and dad’.

Debt restructuring, reverse mortgages and unplanned factors like sudden illness, death or divorce also leave retirees in tough positions.

Some people are working later in life because as a whole they’re fitter but the correlation between retirement delay and increased debt stress can’t be ignored, North says.

“People are postponing retirement because they’ve still got this mortgage debt overhanging and they’re concerned about how they’re going to actually service it.”

Using superannuation to pay down debt and hang onto equity has become increasingly popular but this ultimately counteracts one of super’s core intentions – to take pressure off the taxpayer-funded Age Pension.

A co-ordinated, multi-level government approach would be required to reverse the trend, which, for now, is hamstrung by a circle of blame, North says.

People are being forced to postpone retirement while they work off their debt. Photo: AAP

“Federal government blames the states for lack of housing supply, everybody blames the Reserve Bank for putting interest rates up and interest rates are high because the inflation surged after the government handed out lots of money,” he explains.

“Nobody really wants to take responsibility and this is another classic example where there are unintended consequences of a generation or two of bad policy, which included negative gearing, which included extended low interest rates, first time buyer grants, Home Builder, all the other stuff that was thrown into the system.

“None of this actually helps.”

Around one in five Australians are still paying off mortgages in retirement, National Seniors Australia estimates.

The organisation’s chief executive Chris Grice also notes the trend of tapping into superannuation to pay down debt, which often leaves  retirees in a poorer position to fund services like private health insurance.

“It’s not unusual to have someone paying $4000 or $5000 a year for private health and as you get older you want to maintain that,” he says.

“Let alone insurance costs for home insurance and car insurance and the rest.”

Downsizing is a common goal but a lack of suitable housing stock and transaction costs like stamp duty mean many retirees are wary of selling.

“If you’re going to downsize, you’re going to go into something that actually is fit for purpose to allow you to age in place,” Grice says.

With 710,000 Australians expected to retire in the next four years, public policy settings which don’t lock retirees in the big family home are essential, Retirement Living Council executive director Daniel Gannon says.

“Retirement villages are part of the solution to accommodate this silver tsunami of ageing Australians,” he tells AAP.

“On average, the cost of a retirement village home is 41 per cent cheaper than the median house price in the same suburb – easing the financial burden and freeing up equity to support a secure retirement that older Australians deserve.”

The Council is calling for an increase to the Age Pension Assets threshold, an end to roadblocks for retirees who “rightsize” into retirement villages and for the housing type to be included in the Home Equity Access Scheme.

According to Solace Financial principal and adviser Scott Quinlan, carrying mortgage debt into retirement puts pressure on retirees’ ability to pay for essentials but also impacts quality of life, lifestyle flexibility and long-term financial security.

“If they have superannuation, they could withdraw some of their superannuation to pay off the debt,” he says.

“The other way to go is keep your money in superannuation and then keep your debt, hoping the superannuation will earn a better rate of return than what your mortgage is but that is more of a risky strategy.”

Prioritising debt repayment is crucial to financial stability in retirement and while reverse mortgages could help provide income for living and healthcare costs, retirees have to consider risks such as high fees and potentially having less inheritance to leave behind.

-AAP