Reverse mortgage debts are surging

Canadian seniors are increasingly using their home equity to get a reverse mortgage, according to the Office of the Superintendent of Financial Institutions (OSFI).

The current balance outstanding of reverse mortgages in Canada sat at $3.88bn in September, up 1.32% monthly and 26.43% annually.

"If you're looking for dollar amounts, it was $50.82m in September alone, and $811.62m from the last year. Reverse mortgage debt for the month prints another consecutive all-time high," said market watcher Daniel Wong in a think piece in Better Dwelling.

At this rate, Wong said the record highs are not going to stop anytime soon, given that payments are not required when taking out reverse mortgages.

"Instead, payments only need to be made when you leave the house — usually by death, default, or sale," he said.

Since loan repayments for a reverse mortgage are not on fixed terms, the interest accumulates continuously, inflating the total balance held by banks.

"This number should rip higher for some time, especially with Canada's ageing population," Wong said.

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