Reverse Mortgages Continue Booming North of the Border

HomeEquity Bank, the largest reverse mortgage lender in Canada, posted record originations in 2019 as Canadian retirees continue to seek out financing options designed to fill in for the increasing rarity of traditional retirement funding, such as pensions. Additionally, HomeEquity Bank’s recently-entered rival in the Canadian reverse mortgage space has seen its own business grow an estimated 540% in the last year alone.

This is according to insight from leadership at both HomeEquity Bank and its chief competitor Equitable Bank, appearing in a story at Canadian business publication the Financial Post.

HomeEquity Bank’s 2019 record

HomeEquity Bank reports originating a record $820 million Canadian Dollars (CAD, approximately $627,956,000 USD) in reverse mortgages in 2019, up from $767 million in 2018 and $309 million five years prior. Much of the continued success being enjoyed by the bank is due to more Canadians realizing that there are financial gaps in the context of modern retirement.

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“Seniors now are taking more debt into retirement and debt is pretty hard to manage on a fixed income,” said Steve Ranson, CEO of HomeEquity Bank to the Financial Post.

While the earliest age of eligibility for a reverse mortgage in Canada is 55 compared with 62 in the United States, Ranson says that the average age of a HomeEquity reverse mortgage customer is in their early 70s. Between 30-40% of HomeEquity’s business comes from customers paying off debt which can include a traditional, forward mortgage, but the loan proceeds are continually being applied to other sources of financial stress, as well.

“Occasionally, home equity is even being tapped to pay off credit card bills, he said, adding that his team had heard from seniors that they are turning to reverse mortgages because new federal stress tests make it tough to secure a line of credit against their homes,” writes Financial Post reporter Barbara Shecter.

Last year, HomeEquity Bank sold a bundle of its reverse mortgage loans valued at $75 million CAD to another financial institution in order to fund demand for future loans, he says, adding that HomeEquity is targeting $900 million CAD (or roughly $689 million USD) in new originations for 2020.

Equitable Bank 540% increase

While a relatively recent entry in the Canadian reverse mortgage space, HomeEquity’s only competitor Equitable Bank nonetheless has managed to grow its own portfolio to roughly $20 million CAD, an increase of 540% in the last year alone according to Andrew Moor, CEO of Equitable Bank to the Financial Post.

Describing the Canadian reverse mortgage market as “underdeveloped” in an interview with the Post, Moor detailed that Equitable Bank’s entry into the space came in time to catch a large wave of retirees who lack the traditional benefit of a defined pension.

“He says competition will expand the size of the market by creating an environment where more options are made available to entice consumers,” writes Shecter. “In its second year in the business, for example, Equitable began to offer lower rates to clients who take the full amount of money for which they quality.”

HomeEquity Bank recently detailed to RMD its efforts to create more resonant advertising targeted at the senior demographic, enlisting a neuroscience research firm to aid the company’s marketers in tailoring its messaging to the ways seniors find most appealing. CEO Steve Ranson and CMO Yvonne Ziomecki also presented some examples of the advertising which benefited from the firm’s work at the National Reverse Mortgage Lenders Association (NRMLA) Annual Meeting in Nashville, Tenn. in November, garnering significant attention from event attendees.

Read the story at the Financial Post.

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