The burden of mortgage debt is leading to mental distress and worsening mental health outcomes for older Australians, who are now often carrying unsustainable mortgage repayments into retirement, a new study has found.

Key points: More Australians are finding it difficult to pay off their mortgage before retirement

More Australians are finding it difficult to pay off their mortgage before retirement Mortgage debt among older Australians has outstripped growth in asset prices, incomes

Mortgage debt among older Australians has outstripped growth in asset prices, incomes The lead author says more retirees are likely to rely on the aged pension after using super to pay off their mortgage

Average mortgage debt among older Australians has blown out by 600 per cent since the late 1980s after accounting for inflation, the study says, and nearly half of all homeowners aged 55 to 64 are still paying off a mortgage, up from just 14 per cent 30 years ago.

"These statistics are quite shocking," said Rachel Ong ViforJ, professor of economics at Curtin University and lead author of the study for the Australian Housing and Urban Research Institute (AHURI).

"More and more older Australians are finding it increasingly difficult to pay off their mortgage debt before they retire.

"Our research shows that if you are carrying a mortgage debt and having difficulty repaying it in later life, then your mental health is likely to be poorer than someone who does not have this issue."

Beverley Baker, 69, is one of the growing number of Australians still paying off a mortgage in their senior years. She is also chair of the Older Women's Network of NSW.

Beverley Baker got a mortgage in her 50s after a relationship breakdown. ( Supplied: Older Women's Network NSW )

In that role she has met people in their 50s and older who are homeless after relationship breakdowns and others struggling to serve mortgages and seen the toll it takes.

"It's depression," she said. "If you ask anybody, they're depressed."

"There has to be better ideas than this hard mortgage, grab, buy, sell, buy, sell culture that we are in. A home is not an asset, a home is a need. You know you have wants and needs? It's a need."

More retirees stuck renting

AHURI's study also points to a sharp rise in the number of older Australians set to be stuck in the private rental market when they can no longer work because they cannot service mortgage repayments, or because they could not afford to buy a home in the first place.

By 2031, it forecasts a 60 per cent rise in the number of people eligible for Commonwealth rent assistance, to more than 400,000.

It says there will be a need to "rethink housing solutions" and provide more public and social housing outside of the traditional private rental market.

Ms Baker had to start again in the property market in her 50s after a relationship breakdown.

"I still have eight years to go on my mortgage. Fortunately, I have a job that I love and a board that still likes me and is happy to have me work for them," she said.

"Taking it on [ a mortgage] at 52, it's a different ballgame, I'm not expected to work until I am 77, but that's the reality, I have to work until I am 77.

"[I'm] nervous, very nervous to be so close and run the risk of losing it [if I can no longer work]."

Professor Ong ViforJ said the study's findings had huge implications for future Commonwealth budgets, with a growing share of retirees likely to be relying on the aged pension after using their superannuation to pay off mortgage debt when they stop working.

Professor Rachel Ong ViforJ found the results of the study troubling. ( Supplied: Curtin University )

"Governments can expect that will create quite a lot of pressure in terms of the amount of funds that they will have to divert to the aged pension system," Professor Ong ViforJ said.

"When I saw these numbers I actually felt quite insecure myself.

"I felt insecure about my future because like many other Australians, I am someone who would be looking at carrying mortgage debt for quite a long time yet."

Housing debt outstrips income growth

AHURI also found that the surge in mortgage debt among older Australians has outstripped growth in asset prices and incomes.

After inflation, the mortgage debt carried by people aged over 55 in 2015 was up 600 per cent on 1987 levels.

Over the period in which mortgage debt blew out by 600 per cent, house prices tripled.

Income growth lagged even further behind, doubling over the same period.

Ms Baker said the equity in her house would not necessarily be enough for her to buy a home in the area she lives in if she had to sell.

"Yes, I would get a lot more than I paid for it, but that doesn't give me a home, and it doesn't ensure that I could replace my house if I could no longer work and couldn't pay the mortgage," Ms Baker said.

"Where I live, I would never be able to stay there, to have my friends around me, to have easy access to the [train] station — I'm two minutes from the station.

"Those things are really important as you get older in life."