Plenty of people plan to reach retirement with the home loan paid off. Plenty don’t get there. Research from CFS, reported by Financial Newswire in March 2025, found that 28 per cent of pre-retirees aged 50 to 64 have a mortgage, and 14 per cent of retirees are still paying one off.
On 29 September 2026 the Reserve Bank lifted the cash rate target by 25 basis points to 4.60 per cent. If you are heading into retirement with a loan, that decision matters to your budget. This article sets out the questions worth working through, in plain language.
What a rate rise means in dollars
A quarter of a percentage point sounds small. On a $400,000 loan it is roughly $1,000 more interest a year, or about $83 a month, before any further increases. That is a simple illustration only. Your own figure depends on your loan balance, your rate and whether it is fixed or variable.
While you are working, a rise like that is absorbed by your pay. In retirement the money usually comes from super, savings or the Age Pension. A bigger repayment can mean drawing more from those sources, or cutting other spending.
The questions worth asking before you stop work
There is no single right answer for everyone. These questions help you see where you stand.
| Question | Why it matters |
|---|---|
| How much is left on the loan, and for how long? | A loan running past your retirement date has to be paid from retirement income. |
| Is the rate fixed or variable? | A variable rate moves with decisions like the one on 29 September. A fixed rate does not, until the fixed term ends. |
| Where will the repayments come from? | Super, savings and pension income each have different rules and tax treatment. |
| Will the lender still lend to you in retirement? | Refinancing is harder once your pay stops, so it is worth asking early. |
Using super to clear the loan
Many people consider taking a lump sum from super to pay off the mortgage. The tax side can be simpler than people expect. According to the Australian Taxation Office, once you are 60 or over, a lump sum paid from the taxed element of your super is not taxed in your hands. The rules differ for people under 60, and for untaxed elements such as some public sector schemes.
Tax is only one part of the picture. Taking money out of super means less invested for later years, and it can change how much Age Pension you may receive. Your home is not counted in the Age Pension assets test, but money held in super and other assets can be. On the other side, clearing the loan removes the interest cost and the exposure to future rate rises. Weighing those trade-offs depends on your balance, your age and what else you own.
Other things to check
The RBA noted in its September statement that housing prices have fallen in most capital cities. If you are thinking about downsizing to reduce or clear the loan, the sale price you hoped for may have moved. It is worth keeping that in mind when you look at your numbers.
It also helps to know your minimum position. If you have an account-based pension, the ATO sets minimum annual payments by age, and your loan repayments sit on top of your living costs. Putting your income, your loan repayments and your everyday spending side by side shows whether the plan holds up if rates rise again.
A calm way to approach it
Start with the facts you can check: the loan balance, the rate, the term and your expected retirement income. Then test the plan against a higher rate to see how much room there is. If the answer is uncomfortable, it is better to know it before you stop work than after.
If you would like to talk it through, we are happy to help.
This article contains general information only and does not take into account your objectives, financial situation or needs. Consider whether it is right for you and seek personal advice before acting on it.
Jason Bell and Compass Retirement and Aged Care are Authorised Representatives of Millennium3 Financial Services Pty Ltd (AFSL 244252).
Sources: Reserve Bank of Australia, Statement by the Monetary Policy Board, 29 September 2026 (rba.gov.au/media-releases/2026/mr-26-27.html); Financial Newswire, “More retirees weighed down by mortgage debt: research”, March 2025 (financialnewswire.com.au/superannuation/more-retirees-weighed-down-by-mortgage-debt-research); Australian Taxation Office, Payments from super (ato.gov.au/tax-rates-and-codes/key-superannuation-rates-and-thresholds/payments-from-super).
