Reverse Mortgage Demand Surges in Canada, Up 35% from 2016

The lone Canadian reverse mortgage lender logged a record month for originations in May, validating recent rumblings about a potential surge in demand for home equity conversion products north of the border.

HomEquity Bank, which offers the proprietary CHIP Reverse Mortgage to Canadians 55 and older, reported a record $60 million in originations in May for a year-to-date increase of 35%.

“Canadian seniors are releasing the equity they’ve built in their homes, transforming it from passive to active,” HomEquity president and CEO Steven Ranson said in a statement trumpeting his company’s May results. “We’ve seen a shift in mindset: There’s a broader understanding that home equity — which is often the largest single asset for Canadians — can be easily unlocked.”

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The Toronto-based HomeEquity’s strong spring validates the trends that mortgage agent Mich Sneddon claimed to be seeing in an May interview with RMD. Sneddon, who works for broker Dominion Lending Centres, said CHIP mortgages account for about half of his volume, and he projected that the product to be the fastest-growing mortgage product in Canada over the coming years.

Sneddon and others have pointed to Canada’s aging population as a potential source for reverse mortgage growth in the country: For the first time in the nation’s history, adults older than 65 outranked children younger than 15 last year, according to the most recent Canadian census. And as in the United States, Canadian homeowners control a significant amount of home equity — but, unlike their American counterparts, they didn’t see values fall as precipitously during the Great Recession, Sneddon told RMD.

The CHIP mortgage is an entirely private program, with no government backing; as a result, Sneddon said, HomeEquity tends to lend more conservatively than U.S.-based reverse mortgage firms, capping loans at 55% of the home’s value.

HomEquity’s release took a novel marketing angle, positioning Canadians 55 and older as “the bank of Mum and Dad” — spending their retirement cash to put their children through school or buy homes of their own, thus leaving home equity as their single biggest option for retirement.

“Historically, the average age of our clients is 72,” Ranson said in the release. “Working together with financial planners and mortgage brokers, we’re finding that people incorporate equity release into their financial outlook at an earlier age.”

Written by Alex Spanko

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