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March 10 , 2021  /   Mortgage Trends

Home Run: The Reverse Mortgage Advantage – Chapter 1: Canada’s Unstoppable Real Estate Market

Home Run: The Reverse Mortgage Advantage, is the new book written by HomeEquity Bank’s CEO Steven Ranson and Executive Vice-president of Marketing Yvonne Ziomecki. Home Run provides a straightforward and candid resource for you and your clients who are considering using a Reverse Mortgage to ensure their retirement years are secure and enjoyable.

Throughout its eight chapters, the book covers a range of important topics, from trends in the Canadian real estate market, to the new face of retirees, anti-ageism advocacy, and insights from our clients.

Below, we look at some key takeaways from the book’s first chapter: Canada’s Unstoppable Real Estate Market.

Canada’s booming real estate market

Most homeowners are aware that buying a home was a smart investment decision, but many don’t realize quite how smart a decision it was. Someone buying a home in Toronto in 1971 would have paid on average $30,426, increasing to $189,105 in 1987 and a staggering $566,696 by 2014. But it doesn’t stop there, according to the Toronto Real Estate Board, the average sale price in October 2020 was $960,772.

Home Run: The Reverse Mortgage Advantage - Chapter 1: Canada's Unstoppable Real Estate Market

And the story looks similar across the rest of the country. The Canadian Real Estate Association reported in September 2020 that the average price of a Canadian resale home was $604,000, up 17.5% from a year earlier.

While house prices have been exploding, interest rates have dropped. In the early 2000s, the interest rate on a mortgage was around 7%, by 2015 the rate had dropped to 3.8%, and in 2020 the rate hovered around 2% for a five-year mortgage.

All of this is to say that today’s homeowners are sitting on considerable wealth which they may not be fully aware of.

Some harsh economic truths about debt in retirement

On the flip side, and despite having more wealth in their homes than ever, today’s older Canadians also carry more debt than ever.

According to Statistics Canada, the proportion of senior households with debt was 42% in 2016, up from 27% in 1999. The median amount of debt was $25,000 in 2016, up from $9,000 in 1999 (expressed in 2016 constant dollars).

But older Canadians’ money woes don’t end there. A 2018 report by Statistics Canada found that the 2008–09 recession, combined with the decline in pension coverage, and the shift from defined-benefit to defined-contribution pension plans in the 1990s and 2000s, may have made it harder for many to accumulate enough savings for retirement. The result of this is that Canadians are not only working longer than they used to, but they’re also retiring with less.

Furthermore, a 2016 study by the Broadbent Institute showed that the median value of retirement assets for Canadians aged 45 to 64 is just over $3,000. And with Canada Pension Plan payouts at around $700 a month, it’s not surprising that many Canadians are feeling a sense of despair around their retirement.

Client Case Study

This was the case with Mary and John, a couple from BC who came to us a few years ago. The pair had not saved enough for their retirement and were relying on John’s modest pension for their daily living expenses. After speaking to our Mortgage Specialists, Mary and John signed up for the CHIP Reverse Mortgage. They were able to supplement their monthly income, helping them enjoy a more comfortable retirement in the home they loved. Looking back on the experience, Mary told us she had felt like she was drowning, and we had pulled her out of the water.

If your clients are like many older Canadians, they may be house rich but cash poor. In this situation, the CHIP Reverse Mortgage is a valuable tool that can help get them on track and create the secure and stress-free retirement they’ve always wanted. What’s more, the steps to securing a Reverse Mortgage are also stress free and straightforward.
Home Run: The Reverse Mortgage Advantage - Chapter 1: Canada's Unstoppable Real Estate Market

If you’d like to read Home Run: The Reverse Mortgage Advantage, you can contact your BDM to get a copy today. Or place an order here.

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