Spurred by greater borrowing among senior Canadians, the balance of reverse mortgage debt nationwide reached a record high of $3.54 billion in February, according to data from the Office of the Superintendent of Financial Institutions.
Said figure was 0.84% higher compared to the month before. This is despite a continued slowdown in the annual increase of total reverse mortgage debt, settling at 28.56% as of February.
And while the year-over-year increase was the lowest since October 2017, the balance still remains on track to grow two-fold every three years, Better Dwelling noted in its analysis of the OSFI numbers.
“The pace of growth makes it one of, if not the, fastest growing segments of debt in Canada,” the analysis added.
Steady growth in this debt sector might pose a significant threat to Canada’s elderly, especially considering the demographic’s growing share of the lending pie.
“Seniors are unlikely to get a windfall of new income, meaning timely repayment (if at all) is not likely. Since the lender doesn’t know when they’ll get their money back, they charge a premium to HELOCs. The combination can quickly cannibalize a home owner’s equity,” Better Dwelling warned.
Last year, TransUnion found that the number of mortgages issued to Canadians aged 73-93 shot up by 63% during the year. In stark contrast, baby boomer (54-72 years old) originations increased by just 18%.