Older New Zealanders battling bigger mortgages

Many older New Zealanders are running out of money, data shows.
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Many older New Zealanders are running out of money, data shows.

New Zealanders who have been through divorce, unexpected unemployment or other financial setbacks are nearing retirement with their finances in bad shape.

New data from credit score provider CreditSimple.co.nz shows New Zealanders over 55 are an increasingly large percentage of bankruptcies.

They now represent 27.8 per cent of all bankruptcies, up from 20.6 per cent in 2010. 

CreditSimple spokeswoman Hazel Phillips said her organisation's staff had reported from their conversations with older people that many said they were struggling to make ends meet. "As you get older your credit score gets better but they would say 'I don't understand how I've got quite a good credit score when I owe heaps on my mortgage and I feel like I'm really not in control'."

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But she said even people who were surviving on little money could achieve a good score, provided they were paying their bills.

Older people are also staying in debt longer – 28 per cent of mortgages are now held by people aged 55 and over, giving them 10 years to pay off an average mortgage of $321,000 by 65.

The data also shows that people over 65 are responsible for 8 per cent of mortgages, and owe an average $232,000. That would mean repayments of about $706 a fortnight on a typical mortgage, or more than half a retired couple's pension payment.

Aucklanders had the most mortgage debt – those 55 and over with a home loan have an average mortgage of $393,229.

Phillips said it was possible that some of those people might be banking on being able to sell up and move elsewhere, to pay off their home loans. "That's fine if that's your strategy and it will work. But if people want to stay that's a bit of a struggle."

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Financial adviser Liz Koh said she had been concerned about the financial health of baby boomers for some time.  People could be left struggling to make ends meet if their financial plans were set off course by divorce, redundancy, illness or business failure, she said.

She said there was an "avalanche" coming of people nearing retirement with debt owing.

There were a large number of people who were left vulnerable, she said, because of the disruptions they had to deal with that their parents' generation had not.  Many had their finances stretched so tight that one misfortune could tip them over the edge.

 "They've been cleaned out by things that have gone wrong."  

Koh said some thought needed to be given to what support was made available to people in that situation. 

"It's not necessarily too late to turn it around at 55," she said.

But she said it was sometimes hard for people to find the resources to help them do something different to put themselves in a better position. "They might need a hand up, money to set up a business, or help with debt restructuring."

Many had high-interest short-term debt, she said, and did not have the assets to restructure it over the long-term. More options could be made available to help people spread their debt at lower interest rates to achieve the breathing space necessary to get back on track, she said.

 

 - Stuff

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