Are boomers betting the farm on the house?

Chances are you won’t retire debt-free like your parents’ generation.

That’s the conclusion of a study by the National Center for Policy Analysis (NCPA), a nonprofit, nonpartisan public policy research organization dedicated to promoting free-market alternatives to government regulation. The study compared the pre-retirement spending habits of today’s middle-aged (45-54) and older workers (55-64) with those in the same age groups 20 years ago. It found that more boomers carry mortgages, and spend a higher percentage of their income servicing that debt, than their predecessors.

Here are some of the findings:

  • Home mortgages comprise almost three-quarters of all consumer debt, and three-fourths of middle-aged and older workers’ households have mortgages.
  • From 1990 to 2010 the share of expenditures on housing — including principal, mortgage interest, taxes, maintenance and insurance — for these age groups increased about 25 percent.
  • For 55 to 64 year olds, nearly half of this increase was due to an increase in the interest portion of housing expenditures — even though mortgage interest rates have fallen over time.
  • The portion of income boomers spend on mortgage interest increased 47 percent, from 4.3 percent to 6.3 percent.

Housing debt has risen for several reasons, according to NCPA senior fellow Pamela Villarreal:

  • Since a higher percentage of pre-retirees purchased their first home at a later age, many will still be paying for their homes when they retire.
  • In the mid-1990s, the Federal Housing Authority allowed more borrowers to qualify for loans with lower down payments, bumping up the size of those loans.
  • Instead of paying off their mortgages, many baby boomers borrowed against the equity in their homes.

And then there are the effects of the Great Recession on boomers’ children.

“Fifty-nine percent of these parents are providing financial support to adult children who are no longer in school,” Villarreal said. “Nearly one-third has paid off student loans for their children.”

As they say in Vegas, never bet against the house.