NETSPAR BRIEF 18: Problematic Debt after Retirement?
For five to ten percent of retirees with an interest-only mortgage, the affordability of the outstanding loan amount at the end of the term could be problematic. This affects 23,000 to 46,000 households. That is the finding from an analysis by Mauro Mastrogiacomo (DNB) outlined in the 18th Netspar Brief. Entering into a new long-term, interest-only loan is often not an option for these people; stricter requirements for extending the term of the mortgage could result in a significant increase in housing costs. At the same time, household income often drops after retirement, and this segment of the population generally has insufficient personal assets to absorb the affordability problems.
Although the high-risk group is not extremely large, it should also not be ignored. Introducing universal policy for, say, extending the mortgage interest deduction is probably not the best solution, given the relatively small size of this group of people. It is advisable, however, to come up with a customized solution for them. If they were able to extend some or all of the interest-free mortgage, for instance, payment problems could be prevented.
- Debt affordability after retirement, interest rate shocks and voluntary repayments, Mauro Mastrogiacomo, 2019
- Wonen en pensioen als financieel lego (House and pension as financial legos), Dirk Brounen e.a. Netspar Brief 17, 2019
- Model Risk in the pricing of reverse mortgage products, Anja de Waegenaere e.a., 2017
- Will we repay our debts before retirement? Or did we already, but nobody noticed?, Mauro Mastrogiacomo, 2016