Reverse Mortgage Debt Skyrockets 31% YoY Among Canadian Seniors

Better Dwelling | Daniel Wong | Feb 6, 2023

Reverse mortgage debt has recently surged in growth, with the debt rising at an unusual fast rate for any credit segment.

• 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.
  • 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.

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• 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.
  • 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.
  • 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.

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