Like the United States, Canada has seen demonstrable growth in its reverse mortgage business particularly since the beginning of the COVID-19 coronavirus pandemic as more seniors look to facilitate their desire to age in place in their own homes.
However, with that additional business could also come additional scrutiny from the nation’s Office of the Superintendent of Financial Institutions (OSFI), the body charged with reinforcing the public’s confidence in the Canadian financial system.
This is according to a story published by the Financial Post, a Canadian finance news outlet.
“A housing price run-up spurred on by low interest rates and the desire for more space among many Canadians means homeowners have a burgeoning pile of equity to draw from,” the story reads. “The balance of outstanding reverse mortgages hit a fresh high in February at $5.4 billion, according to regulatory filings by the Office of the Superintendent of Financial Institutions.”
One of the byproducts of the pandemic is a shift in attitudes about retirement among the Canadian senior population according to Andrew Moor, CEO at the nation’s number two reverse mortgage provider Equitable Bank.
“[COVID is] making it less desirable to go in living in congregate situations and people prefer to stay in their homes,” Moor told the Financial Post. “When we got in the business, it certainly seemed to us that this was an approach that was less understood in Canada than other kinds of similar economies. It’s one of the reasons why we got into the reverse mortgage business, we believed it was an under-tapped [market].”
However with that success also comes the potential for a higher level of regulatory scrutiny, the story says. In April, the OSFI publicly pronounced that it was going to be keeping a watchful eye on the nation’s growing reverse mortgage business, a point emphasized by one of its representatives to the Financial Post in its story.
“Our message has been quite simply that [these lending products] are important developments in the market, but they can mask the rising credit risks in books,” said OSFI Deputy Superintendent Ben Gully to the outlet. “And so, we’ve spent significant time reinforcing those messages over the last couple of years and making sure innovations remain safe and prudent and that our firms that we supervise understand the risks.”
At the beginning of the year, the nation’s largest reverse mortgage lender — HomeEquity Bank — announced that it had surpassed $1 billion CAD approximately $792.5 million USD) in reverse mortgage originations.
Read the story at the Financial Post.
