More Retirees Carry Mortgage Debt


Retiring baby boomers are less likely to be mortgage-free compared to people their age in previous generations, according to Fannie Mae. That could hurt boomers’ financial security and exacerbate the housing affordability crisis.

Slightly less than 50 percent of the oldest baby boomer homeowners in 2015 were mortgage-free, 10 percentage points lower than the number of Silent Generation homeowners who were in the same age group in 2000 and mortgage-free, according to Fannie Mae. “The increasing prevalence of housing debt among older homeowners could compromise financial security in retirement by expanding housing affordability problems, crimping essential non-housing spending, increasing vulnerability to home loss through foreclosure, or limiting the accumulation of housing wealth,” Fannie Mae researcher Patrick Simmons writes on the GSE’s Housing Perspectives blog.

Between 2010 and 2015, when the housing market was recovering from the crash, baby boomers were paying off their mortgages at an accelerated pace. But even if that trend continues, researchers predict, the rate of boomers who own their homes free and clear in retirement is unlikely to keep pace with previous generations.

“The greater propensity of boomer homeowners to carry housing debt might signal the need to expand consumer outreach and education that helps older mortgagors manage their monthly housing expenses, including ensuring that they have fully exploited opportunities to reduce monthly mortgage payments through refinancing,” Simmons notes. “Educating younger boomers about options for shorter-duration mortgages that accelerate principal pay-down might also increase the likelihood that they enter retirement with little or no housing debt. For older boomer mortgagors who wish to eliminate housing debt, an option worth considering is trading down to less expensive homes.”

Source: “Baby Boomers Accelerate Their Advance into Free-and-Clear Homeownership,” Fannie Mae’s Housing Insights (Oct. 5, 2017)

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