Retirees are being locked out of credit — and it’s holding the system back

For a system that increasingly relies on older Australians to make active, financially informed decisions about how they age, there is a strange blind spot sitting in plain view.

We still assess their ability to borrow as if retirement were a financial cliff.

COTA Australia’s pre-Budget submission calls it out directly, warning that current lending approaches risk locking retirees out of credit because they no longer fit a workforce-based income model.

That’s not just a quirk of the banking system. It’s a structural misalignment that cuts across housing, superannuation, and aged care reform.

The rules haven’t kept up with the balance sheet

On paper, many older Australians are more financially secure than ever. Home ownership remains high, super balances have grown, and a significant proportion are asset-rich.

But lending doesn’t run on assets. It runs on serviceability.

APRA’s prudential standards and responsible lending obligations have, for years, pushed banks toward conservative assumptions about income stability and loan duration. Those settings make sense in a workforce context. They start to break down when applied to someone drawing down super, managing investments, or holding substantial equity with limited “traditional” income.

The result is familiar to anyone who has tried: strong balance sheet, weak borrowing capacity.

So you end up with a system where a 70-year-old with a paid-off home and solid super can be treated as higher risk than a 40-year-old with a mortgage and a salary.

It’s technically defensible. It’s also increasingly out of step with reality.

Housing policy assumes movement. Credit quietly blocks it

Now layer in housing.

For years, policy conversations have leaned on the idea that older Australians will help unlock supply by downsizing or transitioning into more appropriate housing. Retirement living, land lease communities, and age-friendly apartments all sit downstream of that assumption.

But moving costs money.

Bridging finance, deposits, refurbishment, entry contributions. None of it happens cleanly without access to credit, even for people with substantial assets.

This is where the system starts to contradict itself. We encourage mobility in later life, but restrict the financial mechanisms that make mobility possible.

The outcome is inertia.

Older people stay put longer, not always by choice but because the path forward is harder than it should be. The housing system tightens further, and the knock-on effects ripple outward.

Aged care reform is leaning in the same direction

At the same time, aged care policy is shifting toward greater individual responsibility.

Support at Home, user contributions, and broader reform settings all reinforce the expectation that people will plan earlier and fund more of their own care. That model only works if individuals can actively deploy their financial resources when needed.

In practice, that’s not always the case.

COTA’s submission also highlights cost-of-living pressures pushing older Australians to delay essential care, including dental treatment. That might sound like a separate issue, but it points to the same underlying constraint. When liquidity is tight, even relatively small costs get deferred.

And when care is deferred, it rarely disappears. It escalates.

Superannuation was meant to solve part of this. It hasn’t fully

Super was designed to provide income in retirement, not necessarily flexibility.

Drawdown rules, longevity risk, and behavioural patterns all mean retirees are often cautious about accessing their own capital. Add limited access to credit on top of that, and you get a system where wealth exists, but isn’t easily used.

That’s the real friction.

Not a lack of resources, but a lack of usable financial capacity at the point decisions need to be made.

Everyone sees a piece of it. No one owns the whole

If you read across pre-Budget submissions from ageing, housing, and financial sectors, the same themes keep surfacing:

• older Australians sitting on significant housing equity
• pressure to improve housing mobility and supply
• growing expectations around self-funded care
• persistent concerns about affordability and access

What’s missing is the connective tissue.

Financial regulation sits over here. Housing policy over there. Aged care reform somewhere in between. Each makes sense in isolation. Together, they don’t quite line up.

COTA’s call for a 10-year national plan for ageing is, at its core, an attempt to force that alignment. Not because the sector needs another strategy document, but because the current approach is visibly fragmented.

The risk is not dramatic. It’s cumulative

Nothing here breaks overnight.

Instead, it shows up in small decisions that don’t get made. Moves that are delayed. Care that is postponed. Equity that sits unused. Pressure that shifts quietly into other parts of the system, usually at a higher cost.

Credit access for retirees is one of those pressure points.

Left unresolved, it doesn’t just affect individuals trying to borrow. It starts to slow down the very system that increasingly depends on them making decisions in the first place.