Cash strapped, house rich Boomers (and beyond!) are cashing in on their housing windfalls. Office of the Superintendent of Financial Institutions (OSFI) filings show reverse mortgage debt reached a new high in August. The pace of growth is finally leveling out, but it’s still one of the fastest growing segments of debt.

Reverse Mortgage

Reverse mortgages are a way for seniors to tap home equity, without selling their home. Borrowers pledge equity, and receive a loan in either a lump sum or regular payments. Not unlike a home equity line of credit, but there’s no regular repayment schedule. Instead, borrowers generally only have to pay it back at the time of death, default, or sale. Meanwhile, interest quietly racks up in the background, eating away at your equity.

Canadians Owe $3.8 Billion In Reverse Mortgage Debt

Canadian seniors are busy borrowing quite a bit of cash through reverse mortgages. Filings show $3.83 billion in reverse mortgage debt in August, up 1.33% from a month before. This represents an increase of 26.23% from the same month last year. The increase puts the balance at a new record high, with a very, very fast growth rate.

Canadian Reverse Mortgage Debt

The total of reverse mortgage debt held by regulated finacial instituitions, in Canadian dollars.

Source: Regulatory Filings, Better Dwelling.

The growth rate is leveling out, but at a very high level. The 26.23% 12-month growth observed in August is just a few bps lower than the month before. Seniors racked up $50.63 million of reverse mortgage debt in the month, and $796.11 million over the past year.

Canadian Reverse Mortgage Debt Change

The annual percent change of reverse mortgage debt held by regulated finacial instituitions.

Source: Regulatory Filings, Better Dwelling.

The rate at which reverse mortgages are growing is finally beginning to level out. Although it’s leveling out at a high rate of growth. It’s quite possibly the fastest growing segment of debt in the country. Considering the high interest rate, and lack of urgency to pay it off – this will likely persist for a while.

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