Could 2065 be the year you pay off your home loan?

Do you fancy paying off a home loan until 2065?

By this point, we could all be commuting in flying cars – or possibly living a different, more dystopian future.

But however the next 40 years pan out, a surprisingly high proportion of Australians would take out a four decade home loan if it made the monthly repayments less onerous.

Despite the fact that such a lengthy loan extension would likely add hundreds of thousands of dollars to the final amount paid, a Finder survey of 1,013 respondents revealed 30 per cent of Australians – equivalent to 6.2 million people – would do just that.

Only four lenders currently offer 40-year mortgages in Australia – three of those exclusively to first home buyers.

More banks may soon be looking to hook borrowers in for longer though.

Housing affordability deteriorated to a three-decade low despite the Reserve Bank’s repeated interest rate hikes over 2022 and 2023.

With interest rates now entering a likely cutting cycle, property prices could again take off, adding to the allure of 40-year home loans for those desperate to get a foot on the property ladder.

Anyone entering into such a long-term financial arrangement should be aware of the pros and cons.

Finder analysis shows that while the monthly repayment for the average Australian loan of $641,416 would drop by more than $300 on a 40-year loan compared to an identical 30-year loan, the full repayment would cost the borrower $316,000 extra.

Carolyn Xaftellis and Grace Neo, Senior Mortgage Specialists at Specialist Mortgage, told API Magazine that the loans can be managed and could even pay dividends if the right property was purchased.

“Opting for a loan term longer than 25 to 30 years results in a higher amount of interest paid over the term, however, this can be mitigated by making additional repayments during the loan term when possible, such as paying a bonus into the loan or increasing regular repayments when expenses like school fees cease,” Ms Xaftellis said.

“Additionally, opting for fortnightly or weekly repayments instead of monthly ones can accelerate debt repayment.

“Longer loan terms often come with higher interest rates due to increased risk but the potential growth in property value can offset this disadvantage.”

Ms Neo added that lending landscape had shifted dramatically since the years when borrowers would sit unthinkingly with one bank for the lifetime of their mortgage.

“No one has the same 25- or 30-year loan anymore.

“The average life of a loan nowadays is about four to five years and with the current competitiveness in the market, astute borrowers would be looking at refinancing or restructuring loans within that timeframe.

“So technically, nobody would necessarily be tied down to a 40 year loan term if their circumstances changed.”

The average home loan size in Australia reached a record high of $641,416, according to data from the Australian Bureau of Statistics. That’s up by 37 per cent from September 2019 when the average home loan size in Australia was $467,403.

In response, Finder research published last year showed 13 per cent of homeowners had extended the length of their loan in the year prior to lower their repayments. Nearly half extended their loans by more than five years.

There is fertile ground to sell the idea of 40-year home loans.

As of December, 27.9 per cent of mortgage holders or 1,595,000 people were at risk of mortgage stress. This is 788,000 more people than when the RBA began increasing the cash rate in May 2022.

Meanwhile, the number of Aussies considered extremely at risk of mortgage stress now totals 973,000 people or 17.4 per cent of mortgage holders. This is far above the decade’s long-term average of 14.6 per cent.

API Magazine’s most recent quarterly Property Sentiment Report found that 24 per cent of respondents were under mortgage or rental stress and, of those, 69 per cent had slipped into that predicament within the past 12 months.

Added to that, first home buyers are retreating from the market just as investor loans ramp up.

Mortgage growth to first home buyers slowed at the end of 2024, with 1.3 per cent fewer loans settled in the December 2024 quarter compared to the same period in 2023.

Contrast that with the rampaging investor loan market, and you can see why the lower repayments of a 40-year loan are appealling to many, despite the hefty long-term debt implications.

Investor loans grew 22 per cent annually, compared to 6 per cent for owner-occupier loans. This means the investment property market is growing more than three times faster than the rest of the homebuyer market.

Money.com.au’s Property Expert, Mansour Soltani, said rising house prices have increased equity for existing homeowners to invest in additional properties.

“With vacancy rates across capital cities at record lows, rental demand showing no signs of easing and population growth, we’re likely to see the investor market pull even further ahead in 2025 as market conditions shift in a downwards rate cycle,” he said.

In the December 2024 quarter, 161,276 loans were refinanced — the highest level since September 2023 and 12,931 more than in December 2023, marking a 9 per cent increase.

“This was the only quarter in 2024 to see growth in refinancing, suggesting a renewed interest that is likely to pick up in 2025,” Mr Soltani added.