Canadian Seniors Are Racking Up Reverse Mortgage Debt At A Rapid Rate

Canadian homeowners aren’t shy about cashing in on their windfall, especially seniors. Regulatory filings with OSFI, Canada’s bank regulator, show reverse mortgage debt surged in November. Despite rising interest rates, seniors haven’t slowed down on the rush to cash out some of their home equity windfall. In fact, reverse mortgage debt has recently surged in growth, with the debt rising at an unusual fast rate for any credit segment. 

What Is A Reverse Mortgage?

Reverse mortgages are loans disbursed as lump sum or regular payments, secured by your home equity. It’s similar to a home equity line of credit (HELOC), but the big difference is in repayment—you don’t have to make regular payments or prove you have the debt service capacity. 

Generally speaking, reverse mortgages only require repayment in the event of death, default, or sale. This allows seniors to draw on the home equity they’ve earned, without needing to sell or worry about repayments they generally can’t afford on a fixed income. If you don’t have a retirement fund, this is one way seniors are supplementing their lack of income. 

The catch is interest accumulates in the background, eroding the home equity you’ve built up. These loans generally have higher interest rates than traditional HELOCs or mortgage refinancing. Combined with the fact borrowers are seniors past their prime earning years, the situation is slanted towards not being able to pay it off. This will likely leave the borrowers with less equity than they expect at the end of their term, or their kids with a smaller inheritance. 

Like all debt, by itself a reverse mortgage isn’t good or bad—it’s a tool. Like any tool, if used properly it can be an asset, but when used recklessly you can lose a limb. On that note, let’s check out the numbers. 

Canadian Seniors Owe $6.7 Billion In Reverse Mortgage Debt

Canada’s seniors have been on a reverse mortgage borrowing spree. The outstanding balance rose 5.9% (+$370 million) to $6.7 billion in November. The balance is now 31.0% (+$1.6 billion) higher than a year before. Compared to other debt segments, it’s relatively small in total—but the growth rate makes it one of the fastest growing types of debt.  

Canadian Reverse Mortgage Debt

The total of reverse mortgage debt held by regulated financial institutions, in Canadian dollars.

Source: Regulatory Filings, Better Dwelling.

Both monthly and annual growth were unusually fast in November. Monthly growth was the largest since October 2018, and a rate nearly 20x that of regular mortgage debt. 

Rising nearly a third in just one year also makes annual growth unusual. It’s a rate, once again, not seen since 2018—though part of that has to do with a change in reporting methodology. The difference here is that we’re seeing plain ole growth just organically drive the trend. 

Canadian Reverse Mortgage Debt Change

The annual percent change of reverse mortgage debt held by regulated financial institutions.

Source: Regulatory Filings, Better Dwelling.

The sudden boom for reverse mortgage debt is due to a combination of monetary and demographic factors. Since repayment isn’t required, rising rates are likely allowing the debt to accumulate faster for those without fixed terms. A sudden home equity windfall is likely tempting to draw on, and might be needed when dealing with the sudden surge of inflation. 

At the same time, Canada’s massive aging Boomer demographic is cash poor and house wealthy. As they retire, those that need some more funds but aren’t interested in downsizing, will be looking to products like this to make ends meet. This was part of the reason cited by the Ontario Teachers’ Pension when they bought Canada’s largest reverse mortgage provider



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  • Janice Hewstan 1 year ago

    That’s infuriating! They grab you for a mortgage,then go and give a reverse one at a cost of course.So dumb.I will leave this country before being made a fool of .People need to buck up and get smart …..they need to create co operatives for food etc.It’s so out of control.Criminal….just criminal.What is happening is that children need to assist parents financially so that they eventially get an inheritance otherwise these greed mongers benefit.I remember when they first advertised.I phoned and responded in a very negative way.

  • Old guy 1 year ago

    One can only hope that these folks are not falling for the illusion that their home value will rocket up again and their equity will grow some more.
    I suppose that they assume that the feds will bail them out, just like everyone else. Cross your fingers.

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