Why growth of reverse mortgages is surging despite rapid rise in interest rates

The interest rate for a reverse mortgage is around 150 basis points higher than a conventional five-year mortgage today, says HomeEquity Bank’s vice president of wealth distribution

Reverse mortgages have always been a controversial financial product, but that hasn’t stopped their expansion in Canada or from becoming a growing source of interest among advisors as a potential recommendation for certain clients.

Last autumn, HomeEquity Bank brought on investment industry veteran Jeff Thorsteinson as vice-president, wealth distribution, to help grow its advisory channel. The Globe spoke with him recently about the growth in reverse mortgages and the company’s advisor strategy:It’s dominantly demographics. More baby boomers are retiring, and many are house-rich and cash-poor. They have a need for income – and high inflation isn’t helping.

People are concerned about all rates. Historically, our rates have been 2 to 3 percentage points more than conventional rates, but that spread is tightening. We’re about 150 or so basis points higher than a conventional five-year mortgage today. … And as we grow and become more mainstream, that spread’s going to tighten. That will only help people start to think this is a very economically viable option.

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globeandmail /  🏆 5. in CA

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