Older Australians are struggling with mortgage debt, which could result in them losing homeownership.

There are growing risks that more Australians aged 55 and above could end up renting for the rest of their sunset years, according to a new study by the Australian Housing and Urban Research Institute.

The study shows that between 1987 and 2015, the real mortgage debt of older Australians inflated at a whopping rate of 600% as income growth failed to keep up. In fact, the average mortgage debt-to-income ratio in this demographic has tripled from 71% to 211% during the same period, indicating a significant repayment risk.

Homeownership drops amongst older Aussies

The impact of the mortgage burden amongst older Australians is starting to show — the homeownership rates in the 55-64 age bracket has dropped from 86% to 81%, according to the figures from the Australian Bureau of Statistics (ABS). In 2001, four in five in the age bracket were mortgage-free. This has dropped to less than three in five.

"These trends are expected to continue. That means, as the population ages, a growing number of older Australians will still be paying off mortgages or trying to meet rents from fixed incomes," said study author Rachel Ong ViforJ in a think piece in The Conversation.

Even homeownership amongst Australians aged 65 and above fell. In 2001, 96% were mortgage-free. This proportion went down to 90% after 15 years.

As homeownership declines, the number of renters continues to soar amongst senior Australians. Renters in the 55-64 age group rose by 71% during the same period.

Also read: Homeownership becomes a distant dream for younger Aussies

Governments need to step in

The study projected that the impact of mortgage debt to homeownership would increase the Commonwealth Rent Assistance (CRA) eligibility among seniors.

"We can also expect to see public housing waiting lists grow if these tenure changes and demographics eventuate. Their combined impact through to 2031 is expected to swell the number of older persons eligible for public housing from 247,000 to 441,000 — a 79% increase," Ong ViforJ said.

She believes the government needs to reform tenancy regulations in ways that enable housing retrofits to meet the needs of the ageing population.

"We may also see a more fundamental transformation of Australia's housing system and lifestyles in old age. High real house price growth relative to incomes remains a barrier to first home ownership despite low-interest rates. Furthermore, the mandatory superannuation guarantee likely displaces some saving in other assets, including housing," she said.