Canadian seniors are still withdrawing home equity at a brisk pace over the past few months. Office of the Superintendent of Financial Institutions (OSFI) filings show reverse mortgage debt hit a new record in October. Growth of reverse mortgage debt picked up from previous months as well. However, it’s still growing at a slower than usual rate.
Reverse mortgages are when seniors pledge home equity, in exchange for debt. The senior then receives their debt in a lump sum or regular payments. It’s similar to a home equity loan, with repayment terms being the major difference.
Instead of a fixed payment schedule, payments are generally only due in death, default, or sale. Until then, the interest on the loan quietly racks up, wearing away your equity. The rates are also a little higher than mortgages, due to the uncertainty of when the lender gets paid off. They’re less than ideal, but a way for house-rich, cash-poor households to retire.
Canadian Reverse Mortgage Debt Reaches $4.42 Billion
Canadian seniors are cashing in a lot of home equity via reverse mortgages. The outstanding balance of reverse mortgage debt reached $4.42 billion in October, up $52 million (1.19%) from the month before. Compared to the same month last year, this represents a 12.55% increase. The annual growth is lower than it’s been the past few years, but is still huge. Monthly growth of over a point is very large growth for credit.
Canadian Reverse Mortgage Debt
The total of reverse mortgage debt held by regulated finacial instituitions, in Canadian dollars.Source: Regulatory Filings, Better Dwelling.
Reverse Mortgage Debt Growth Picked Up, But Is Still Slower Than Usual
The rate of growth picked up from the month before, and is at a multi-month high. The 12.55% 12-month rate of growth is the highest since July 2020. It’s only a single month though, so not quite a trend reversal. Growth is still generally below levels this segment has been used to.
Canadian Reverse Mortgage Debt Change
The annual percent change of reverse mortgage debt held by regulated finacial instituitions.Source: Regulatory Filings, Better Dwelling.
Reverse mortgage debt is growing at a slower than usual rate, but it’s still growing quickly. The latest numbers show a small acceleration, though a single data point isn’t a trend. It’s impressive to see just a minimal drop in reverse mortgage growth, during a pandemic.
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Real estate is the only thing most people have in Canada, and the government likes it that way. Push budgets so the economy functions like a ponzi scheme.
It technically hasn’t worked for everyone yet, and it’s unclear if they can keep importing people past 2030, when the countries we depend on for immigration are projected to have stronger and faster growing economies.
Many immigrants come here to leave extreme high density living and pollution behind. The other reason is they’re simply a front for an organized crime syndicate, 14K from China to invest large sums into real estate.
Th surveys indicate that Chinese immigrants have some $2.5 million in house investment money, but have no education and no means to suggest they have earned that money, as they only are able to earn below level incomes after coming to Canada
Canadian seniors needing debt to live isn’t a Canada specific problem. It’s a generation encouraged to not save and retire early.
We seem to be forgetting that retirement wasn’t a real thing until recently, and the myth that it would be comfortable for everyone is just that. It’s still more of an aspirational goal.
“Seniors deal with the harsh reality of debt”
Current seniors (older Boomers and Silent Gen) are the wealthiest cohort in Canadian history and their wealth will probably never be surpassed by any generation in the next hundred years. The use of reverse mortgages is just about greed. More money for those luxury cruises they indulge in every year (well aside from 2020). More luxury cars. And if they overshoot and tap out their equity? No problem, underpaid Millennials will just be taxed more to bail them out.
When you think about it, Canada really just consists of old rich people picking the pockets of young poor people.
I had no idea it was this way in the states. Student loans are federal ok. What about student loans from banks? Do they just not issue them?
Barrack Obama made private student loans illegal in the USA as part of the Affordable Care Act….he stripped the private student loan industry of their business and handed it to the government to be administered by 1ONE chicago area bank on behalf of the federal student loan program …and then made it IMPOSSIBLE to default on student loans even if you declare bankruptcy. A banking comglomerate in Nebraska was the main private student load company until ObamaCare….they were called NELNET….
Not entirely true there bud.
The passing of the buck is generations old.
You were placed here to live life and have fun.
That’s what old people have done and still TRY to do.
YOU on the other hand will pay what price is needed to keep The Canadian House Of Cards up.
Speaking of a House of Cards… see what happened to Kevin Spacey?
The same will happen to you but in the financial department.
What has been forgotten in this article and conversation is that seniors are using the savings accumulated in their home ( by way of a reverse mortgage) to do things like pay off high interest debts so they can improve their cash flow based on their fixed incomes. Also if one spouse needs medical care and the fixed incomes are very basic then their own savings in their own home is the logical solution to pay for care or assisted living or whatever the needs maybe. Utilizing a reverse mortgage ensures no more payments monthly and improves cash flow, eases stress and when you really think about it… What is the difference between using the savings in your rrsp/rrif or your own equity ? In Canada you are guaranteed not to have a negative sale on death.
The people complaining about their parents taking a reverse mortgage are just whinny because their inheritance is being used to take care of their parents during their own lives.
Would you as a child of an aging parent prefer to cover the costs of long term care for one of your parents or let their home take that stress away from the parent worrying about how they are going to pay all the bills. The house is a savings account ! For the owners. Not the children and grandchildren’s inheritance. It is essentially retirement funds saved for necessary usage if needed. So instead of saying “racked up debt”. How about saying “took advantage of years of savings and investments and utilized their own savings in their home to improve their personal cash flow situation”. Racked up debt is a poor headline.
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