As more Australians enter retirement with mortgages in place, banks must prioritise certainty in modern lending, argues AMP Bank’s Sean O’Malley
This opinion piece was first published in MPA's March issue.
For decades, the typical Australian mortgage journey followed a familiar arc: take on debt early, steadily pay it down through your working life and enter retirement owning your home outright. That model shaped not only consumer expectations but the way banks designed products, assessed risk and defined what ‘good lending’ looked like. It also shaped banking regulation. Those assumptions are starting to break down.
More Australians are approaching retirement with mortgages still in place. This isn’t a temporary cycle driven by interest rates or housing prices. It’s a structural shift driven by higher property values and a cost of living environment that has reshaped household cash flow decisions.
This ongoing shift is forcing more retirees to think differently. They have worked hard, built equity, accumulated super and planned responsibly, yet will increasingly need to choose between maintaining their lifestyle today or rushing to extinguish debt at the expense of flexibility and confidence. In an environment where Australians are being encouraged to work longer and think differently about retirement income, it makes little sense for lending solutions to remain anchored in assumptions from a different era.
This is where banks and regulators need to pause and reflect. If our customers’ circumstances are changing, our products, assessment frameworks and definitions of suitability must evolve. The challenge is not to loosen standards or compromise on security but to design lending solutions that genuinely align with how Australians now live, work and retire.
Brokers see this first-hand. They sit at the intersection of aspiration, affordability and practicality, helping customers navigate decisions that span decades. Increasingly, for older Australians it will be less about racing to zero debt and more about certainty, flexibility and control. Customers want to know that what is promised at the start of a loan will hold through different life stages, that assessment processes are clear and that structures allow them to manage cash flow without constant renegotiation.
Certainty has become one of the most underappreciated features of modern lending. In a volatile economic environment, the ability to plan with confidence matters as much as price. This is particularly true for customers approaching retirement, when income profiles change, buffers matter more and surprises can have outsized consequences. Lending solutions that provide longer-term visibility on repayments, with appropriate guardrails, can play an important role in supporting better outcomes without increasing systemic risk.
This absolutely does not mean every customer should carry debt indefinitely or that homeownership goals have disappeared. It means recognising that there is no longer a single ‘right’ pathway and that responsible lending can take different forms, depending on the customer’s broader financial position, assets and plans. For asset-rich, cash flow‑conscious customers, particularly those transitioning into retirement, flexibility can be a feature of security, not a threat to it.
The most important shift for the mortgage industry is not cyclical but structural. Australia is entering an era in which retirement, work and housing are far more fluid than they once were. Banks that recognise this and adapt thoughtfully will be better placed to support customers with confidence and resilience. Those that don’t take this approach risk forcing modern lives into outdated frameworks.
The opportunity is clear. By rethinking how we design and deliver lending solutions, while maintaining strong governance and responsible standards, the industry can help Australians navigate later life with greater confidence rather than compromise. That is not just good banking. It is the right response to the world our customers are increasingly living in.
Sean O’Malley was appointed group executive at AMP Bank in September 2021. He has been with the bank since May 2013.
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