A Grattan Institute report published on Monday found that two in three renting retirees live in poverty, with insufficient savings to keep paying their rent in retirement.
More than half of retirees who rent reported having less than $25,000 in net worth.
However, older Australian home loan borrowers appear more financially secure than their younger counterparts, according to the recently published Your Mortgage Home Loan Hindsight survey.
Baby Boomers were the least likely generation to report feeling regret over their mortgage choices, with more than half feeling satisfied with their home loan.
Only 11.2% reported their expenses outweigh their income in the high-rate environment – compared to 22.2% of Gen Z borrowers.
Rent assistance boost necessary to keep a roof over retirees' heads
Despite a noted easing of rental growth, CoreLogic's latest Quarterly Rental Review shows that rent prices across the country are still rising, up 4.8% throughout 2024.
As such, the Grattan Institute expects the number of struggling renters to grow, given the current financial position of older working Australians approaching retirement.
The poorest 40% of renting households aged 55-64 have less than $40,000 in net financial wealth, the report revealed.
The government recently raised the level of the Commonwealth Rent Assistance payments by 27% in the past two budgets. However, the Grattan Institute argues that the rate needs to rise further.
"Even after these increases, a single retiree who relies solely on income support can afford to rent just 4% of one-bedroom homes in Sydney, 13% in Brisbane, and 14% in Melbourne," the report stated.
"And the rents paid by people who get rent assistance have increased nearly 1.5 times faster than the maximum rate of the payment since 2001."
The report calls on the government to increase the current maximum rate of rent assistance by 50% more for singles and 40% for couples.
It also recommends that rent assistance be indexed to increases in rents for the cheapest 25% of rental homes in capital cities, rather than to inflation.
If implemented, the maximum rate would be boosted by $53 a week ($2,750 a year) for singles, and $40 a week ($2,080 a year) for couples.
"This would ensure single retirees could afford to spend $350 a week on rent - enough to rent the cheapest 25% of one-bedroom homes across Australian capital cities," the report noted.
Meanwhile, retired couples could afford to spend $390 a week, enough to rent the cheapest 25% of all one- or two-bedroom homes.
Commenting on the Grattan Institute report findings, former Secretary of the NSW Department of Education Georgina Harrison highlighted that many renters, regardless of age, struggle to find a home they can afford.
"While the focus is often on the plight of younger renters, this report shines a light on the challenges faced by older renters in Australia," Ms Harrison said.
Regrets and predicament of older mortgage holders
As older renters struggle, those who own a home with a mortgage are also facing financial strain due to the current high-interest rate environment.
The Your Mortgage Home Loan Hindsight survey found around one in four mortgage holders across generations are relying on savings to cover their expenses, with mortgage squeezing their budgets.
Around a quarter of Baby Boomers and a third of Gen Z borrowers reported delaying or cancelling major purchases to ensure they could meet their monthly repayments.
These findings reflect the impact of the cash rate surge between 2022 and 2023, which saw the Reserve Bank of Australia (RBA) raising the country's benchmark rate from 0.1% to 4.35%, leading to significantly higher mortgage rates.
According to the RBA data, the typical variable interest rate on a new home loan soared from 2.4% p.a. in April 2022 to 6.3% p.a. in January 2024.
Compared to younger generations, Baby Boomers also reported fewer regrets and a higher sense of satisfaction with their home loan decisions.
The survey found the only category in which Boomers held the greatest regret was extending their loan term (5%), with half (50.2%) reporting no regrets at all.
By comparison, only 40.9% of Gen X reported having no regrets, and the figures spiral further the younger the mortgage holder gets; 34.3% for Millennials and 29.5% for Gen Z.
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