Years of rising home prices have provided a home equity windfall to countless homeowners. And now more Canadians than ever are accessing that equity in the form of reverse mortgages.
Reverse mortgage balances are growing nearly eight times faster than regular mortgage debt, according to figures from the Office of the Superintendent of Financial Institutions. Just last year alone, Canadian reverse mortgage balances are up a whopping 45% from the prior year—totalling $2.69 billion.
Reverse mortgages, which allow senior homeowners to access their home equity in the form of a lump sum and/or scheduled payments, are currently only available from HomEquity Bank (see: CHIP reverse mortgage) and Equitable Bank (see: PATH reverse mortgage).
The Future of Reverse Mortgages
With an aging demographic and more seniors expected to require supplemental retirement income, reverse mortgage volumes are only expected to grow from here.
In 2017 HomEquity Bank reported growth of 32.5% over 2016, with total reverse mortgage originations of $608 million. On a per capita basis, that is a small fraction of the business closed in more established markets, like the USA and Australia.
“As the…population continues to age, there is clear demand among Canadians aged 55 and older to unlock the equity they’ve accrued in their homes,” said Steven Ranson, CEO and President of HomEquity Bank. “…proactive equity release is a more attractive solution than ever for Canadians planning for retirement.”
With rates pushing 6.50%, however, we would not necessarily agree that it’s the best time “ever.” After all, reverse mortgage rates were 4.99% in 2016.