More seniors servicing private mortgages

Figure triples over 6 years to 15,500, but group still forms a minority
By Janice Heng, The Straits Times, 23 Oct 2014

THE number of elderly home owners servicing private mortgage loans has ballooned in the past few years, as more people buy homes in their later years for investment.

According to data from Credit Bureau Singapore, there were 15,506 Singaporeans and permanent residents aged 65 and above with outstanding mortgage loans from financial institutions in July this year. This is almost triple the July 2008 figure of 5,190.

These older home owners also make up a growing proportion of all residents holding bank mortgage loans: 3.15 per cent now, up from 1.84 per cent in 2008.

Retiree mortgage debt has been a cause for concern in countries such as the United States, where 30 per cent of people aged 65 and above had outstanding mortgages back in 2011.

But while there could be cause for concern, experts are not worried about the situation here, because older borrowers with outstanding mortgage loans still form a minority here.

At the same time, not everyone with an outstanding private home loan at age 65 or above is in financial difficulty, they said.

"(The increase) is a cause for concern only if loan holders aged 65 and above face a higher risk of difficulty in servicing their mortgage payment (during) retirement and are 'underwater' on their mortgages," said Singapore Management University economist Phang Sock Yong.

Instead, some retirees might have taken out mortgage loans for investment properties, which yield rental income, she said.

Experts also note that cooling measures aimed at limiting the tenure of a private loan will also prevent the numbers from rising much further.

Elderly home owners with outstanding private mortgages are more likely to own multiple properties, said Professor Deng Yongheng, director of the Institute of Real Estate Studies at the National University of Singapore. "Typically, Housing Board households are what academics and the Government worry about more."

For HDB home owners, the picture is much better. As of the end of July, 93 per cent of elderly households have fully paid for their flats, the HDB said in response to queries. This is out of the 102,000 households with owners aged 65 and above.

It is also an improvement from 2008, the last time the HDB's Sample Household Survey was conducted. Then, 72.4 per cent of elderly people had no outstanding mortgage loans.

The HDB noted that the 7 per cent of elderly households with outstanding loans this year are mainly those who took them up before April 1997. That was when the policy was changed to cap loan tenures so that they do not extend beyond the age of 65.

"With the tighter age-related mortgage rules, it will be harder to retire with a mortgage debt," said Professor Phang.