Canada’s reverse mortgage balance continues breaking its own records, reaching a new high in July as seniors’ borrowing kept intensifying.
The balance stood at $3.78 billion on that month, having increased by 26.24% annually and 0.98% from June, according to OSFI filings.
While growth in this debt type is decelerating slightly, “it’s still one of the fastest (if not the fastest) segments of credit growth,” according to an analysis by housing information portal Better Dwelling.
However, multiple observers have warned that this trend is unsustainable in the long term.
A significant proportion of Canadians are betting on their residential properties as evergreen investments, but several warning signs of housing’s likelihood of failure as a retirement plan have become apparent.
“More and more Canadians are retiring with a mortgage, which 30 years ago would have been unheard of. People are retiring with debt, with a mortgage, simply because they just didn’t plan well,” Carte Wealth Management’s Jacqueline Porter told the Toronto Star earlier this year.
“I have conversations with clients all the time. Freedom 55 is out the window.”
A crucial mistake that many employees and professionals commit is operating under the notion that economic and housing growth will be permanent, Porter added.
“You can’t look at the last 40 years and think that’s what’s going to happen the next 40 years, especially as people continue to use their home as a piggy bank.”