The very slim silver lining in Canada’s reverse-mortgage story

Data on Canadian reverse-mortgage debt suggest brewing problem for seniors borrowing against their homes

The very slim silver lining in Canada’s reverse-mortgage story

A continuing struggle against a widespread retirement income gap has pushed many house-rich, cash-poor seniors into taking on reverse mortgages over the past few years. Over that time, the balance of such debt has grown continually, with an explosion in growth reflected in data from the Office of the Superintendent for Financial Institutions (OSFI).

More recent trends suggest that the situation has improved — though it’s a very marginal improvement.

Citing OSFI data, Better Dwelling has reported that outstanding reverse mortgage debt hit a new all-time high of $3.98 billion in November, representing a 1.45% increase from the previous month and 14.09% year-on-year.

“The pace of growth has been slowing for the past few months, but it’s still very high,” the news outlet said, noting that the latest figures reflect a rate that’s half of where it was last year.

It also reported that in October last year, the annual percent change of reverse mortgage debt held by regulated financial institutions stood at 14.55%; it was little changed in November, when the annual percent change was 14.09%.Those numbers, reflecting the most recent months reported, ostensibly represent the lowest 12-month rate observed since February 2016, when it was reported to be 13.85%

“[T]he balance of reverse mortgage debt is rising 3x the speed of traditional mortgages … slower than last year’s breakneck speed, but still a high growth segment,” Better Dwelling added.

Another cause for concern: some banks reported partial numbers in October and November, which opens the door for upward revisions in reverse-mortgage debt statistics by the end of February.

“The trend [of high growth in reverse mortgages] is most likely to continue with Canada’s aging population,” the news publication said.

That outlook is in line with recent pronouncements from two large players in the space, HomeEquity Bank and Equitable Bank, which predicted continued interest and demand for reverse mortgages going into 2020.


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