Older American homeowners are trailing the prior generation in paying off their mortgages, complicating their finances if they carry the loans into retirement, a report from Fannie Mae released on Thursday showed.
This lag has persisted even with an improving economy since the last recession and a housing recovery in the aftermath of the housing bust in the late 1990s, Patrick Simmons, Fannie Mae’s director of strategic planning, wrote in the article.
The baby boomer generation, or those born in the 1946 to 1965 as defined by the Census Bureau, amounts to 33.4 million households.
Fewer of the oldest baby-boomer homeowners, who were 65 to 69 years old in 2015, were mortgage-free when compared with their pre-boomer counterparts who were the same age in 2000, according to Simmons.
This group’s outright homeownership without a mortgage was 49.4 percent, 10 percentage points below the pre-boomer group at the same age.
The expected mortgage-free rates among younger baby-boomer homeowners were estimated to run higher than the oldest boomers. For example, the rate for the youngest boomers is estimated at 58.0 percent, just under 2 points below that for pre-boomers.
”However, even with the post-recession acceleration in free-and-clear homeownership, Boomers appear unlikely to attain mortgage-free retirements at the same rate as the predecessor generation,” Simmons said.
The oldest of the baby boomers, who are already past the traditional retirement age, with mortgages were more than three times more likely to experience a housing cost burden than were those who owned their homes outright, he said.
“The relatively high incidence of housing debt among Boomer homeowners has the potential to strain their retirement finances,” Simmons said.
Possible ways for these older borrowers to ease their financial burden include refinancing to pare their monthly payments, shorter-term mortgages that accelerate full loan repayment and moving into a less expensive home, he said.