Canadian Seniors Racked Up $408 Million More In Reverse Mortgage Debt This Year

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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 […]

The post Canadian Seniors Racked Up $408 Million More In Reverse Mortgage Debt This Year appeared first on Better Dwelling.

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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

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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