Politicians have long pushed the idea of using superannuation for housing, with a recent senate inquiry examining whether it should extend to offsetting your mortgage.
Whether Australians should be allowed to raid their super to ease mortgage pressure is shaping up this year as a heated fault line in federal politics.
With interest rate rises squeezing households budgets and property values declining , options to ease the burden on homeowners and prospective buyers are firmly in the spotlight.
The Liberal Party says younger Australians are locked out of housing while sitting on inaccessible super, so why not use it now?
The Super Home Buyer Scheme – first proposed in 2022 – looks to let first-home buyers withdraw up to $50,000 for a deposit (capped at 40% of their balance).
The latest senate enquiry was held in September and looked at whether Australians should tap super before retirement as a deposit, loan collateral or a mortgage offset which could reduce monthly interest and pay down a loan faster.
Concern over the impact on home prices and how much it could disadvantage Aussies come retirement time was the push back from both the Labor Party and the Greens.
With that in mind, how do Australians weigh the pressures of housing affordability against the distant reality of retirement?
A case study by the Real Estate Institute of Australia modelled a couple with a $519,000 mortgage, offsetting $172,000 of their super, which cut monthly repayments from $4,999 to $3,342.
Separate modelling by actuary Jonathan Ng found a $40,000 offset on an $800,000 unit would save $164,000 in interest and pay off the loan 3.6 years early.
However, the Grattan Institute warned the inquiry that offset funds miss out on compounding growth, leaving smaller balances at retirement.
Independent economist Saul Eslake says he’s not in favour of the policy. He says while placing super in a mortgage offset account reduces the balance interest is calculated on, it doesn’t earn any interest there either, whereas super earns compound returns.
After five rate rises this year, mortgage rates currently sit at around 6.5% while super returns average typically over 7% after fees — returns that compound year on year.
“Over time, placing your super in an offset means you would forgo more of an increase in your super balance than you save by reducing your mortgage. For most people, it would make them worse off over their lifetime,” Mr Eslake explains.
Matt Grudnoff, senior economist at The Australia Institute, agrees the policy likely doesn’t stack up as a dollar for dollar comparison.
He says while offset savings are tax-free, unlike super earnings (which are taxed at a concessional 15%), this doesn’t mean your super would work better for you in an offset account.
“You’d be better off in the long run having it in super, where it earns more money over your lifetime,” he says. “If you couldn’t pay off your mortgage by retirement, you can take your super as a lump sum and use some of it to pay it down.”
That’s still unclear as far as the Coalitian’s specific proposal has the idea at the moment.
Moving super into an offset account would let people spend it however they like — but leaving it there as some kind of collateral might mean banks can’t access it in the event of default.
“Once in an offset account, there’s nothing to stop you taking it out and spending it on something else,” Mr Eslake says.
Mr Eslake says the evidence is clear: anything that lets people spend more on housing — grants, shared equity schemes, bigger deposits — pushes prices up and leaves fewer people owning homes, not more.
“We’ve got six decades of history, going back to the first homeowner’s grant scheme in 1964, that shows this results in more expensive housing and fewer people owning it,” he says.
Using your super to offset your mortgage is “no different”, he argues.
“By allowing people to have a super offset account, they can afford a bigger loan, which means they pay more for the housing.”
Mr Eslake says a scheme to allow superannuation to be used for buying a home is not likely to help those it is naturally designed for.
The median super balance for 25-29 year olds is around $21,000 for both men and women, Association of Superannuation Funds of Australia figures show.
This rises to an average of $42,962 for men aged 30-24 and $38,070 for women in the same age bracket.
“That’s not going to make much of a difference to how much you can afford to borrow,” Mr Eslake says. The real winners would likely be those that needed help the least.
“The people who would benefit the most from this policy would be people who have $100,000 or $150,000 in super, who are less likely to need help from the government in buying a home.”
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