Canadian seniors accelerates reverse mortgage debt growth

Friday Aug 07th, 2020

Share

It was a slow holiday but seniors in Canada were back to hit the interest for cash of their house. Office of the Financial Institutions Superintendent (OSFI) reports showed a new peak in reverse mortgage debt in January. The new peak came with strong growth acceleration but the pace is consistent with historical figures.

What are reverse mortgages?

Reverse mortgages are a kind of equity-release plan for seniors. Property owners take out a loan in their home protected by debt, and collect it as a refund or as payments. They are close to lines of credit for home equity but the main difference is the terms of repayment. In general, a reverse mortgage is payable only in the case of death, bankruptcy or sale. Since the investor has no idea when they get their money back, they are asking for a higher rate of interest.

Reverse mortgages are successful. Cash-strapped boomers, for example, who do not want to downsize, may age at their home. There are however, quite a few threats; most importantly they can be hard to pay off. You won't get a windfall of earnings in your golden years anytime in the near future. If you don't pay off the reverse mortgage, your equity burns up gradually. If you fall into a frame of mind of not wanting to pay it off, you may be left with far less equity than you would have expected.

The reverse mortgage Debt in Canada hits 4 billion dollars:

To start the year off, Canadian seniors racked up a new high for reverse mortgage loans. In January, the balance hit $4.03 billion, up 0.43 per cent from the previous month. This reflects a 14.47 per cent increase compared to last year's same month. This will also make this one of the fastest growing debt categories, if not the fastest absolute.

The Canadian reverse mortgage debt:

Growth levels have produced a fast turnaround, and are the best in present situation. January's 12-month rise comes off of a multi-month low in December. Today, it is the fastest growth rate since October 2019. The fast bounce is only the first step on the chart after a major drop down and it could be temporary. This level of growth, however, is more consistent with that seen before 2016.

The Canadian reverse mortgage debt change:

Debt on reverse mortgages is rising quite fast, but it is much slower than last year. The present development trend is more aligned with the previous to 2016 rates. Always one of the top rising debt markets yet not the crazy rush of extracting equity last year. Debt on reverse mortgages is rising quite fast, but it is much slower than last year. The present development trend is more aligned with the previous 2016 rates. Always one of the top rising debt markets yet not the crazy rush of extracting equity last year. When the economic uncertainty rises, everyone expects that more seniors will anticipate for reverse mortgage, or more caution is going to lead people to tighten their purse strings.

All in all:

In November 2018, Canada's gross outstanding reverse mortgage loans rose significantly by 31.6% year-over-year, touching a record peak of $3.48 billion. However, in the current situation, they are going through in their home equity, a large number of Canadian seniors have recently expressed fears about their economic prospects. According to Ipsos' new MNP Consumer Debt Survey, 41 percent of Canadians indicated they were concerned about their current accountabilities, and a greater 43 percent said they lament the volume of debt they take on in their lives. "Seniors are typically on a fixed salary, and it is doubtful that a big debt can be paid off easily. They are therefore unable to pursue new supplemental revenue sources at that period either. This adds up to lenders who can run up debt for a really long period, "better dwelling warned in its OSFI data review.

Exceptional Real Estate Services

At DanieleSica.com, we have a team of experienced and professional individuals who ensure to provide you with the best real estate services. Reach out to us anytime for all kinds of real estate advisories.  

Follow us on:

Facebook

Instagram

YouTube

 

Post a comment