Competition Heats Up in Canada's Reverse Mortgage Market
Canadian seniors with reverse mortgages are discovering newfound leverage as competition intensifies among lenders in this specialized financial sector. According to mortgage expert Robert McLister, the entry of new players has created opportunities for borrowers to secure better terms and potentially put cash back in their pockets.
The Rise of Reverse Mortgage Switching
For years, traditional mortgage borrowers in Canada have enjoyed the ability to switch lenders at renewal with minimal costs, often receiving cash-back incentives from new lenders. This practice was largely absent from the reverse mortgage market until recently. The landscape changed dramatically last year when Equitable Bank introduced a groundbreaking offer: one percent cash back for reverse mortgage switchers, with a maximum benefit of $4,000.
Equitable Bank has been aggressively pursuing market share from the long-standing industry leader, HomeEquity Bank, employing multiple competitive strategies. Beyond the cash-back incentive, the company has been undercutting rivals on interest rates, offering fee waivers for setup costs, and boldly advertising that they will beat any reverse mortgage rate posted in Canada.
Expanding Options for Canadian Seniors
The competitive pressure has extended beyond Equitable Bank. Fellow competitor Bloom Finance has also contributed to shifting the industry toward a more consumer-friendly mindset. According to Rebecca Awram, a reverse mortgage specialist at Indi Mortgage, this increased competition has generated significant interest among borrowers.
"There are two main groups of borrowers," Awram explains. "The ones that still have a mortgage at retirement, and/or lots of unsecured debt, looking to improve their cash flow to avoid downsizing or renting, and the ones with clear-title homes and substantial resources who understand the strategic advantage of a reverse mortgage for financial planning."
This latter group utilizes reverse mortgages for various strategic purposes, including minimizing government Old Age Security clawbacks, avoiding the sale of other investments, preventing movement into higher tax brackets, providing down payment assistance to children, or purchasing additional properties.
Industry Response and Innovation
The presence of four major lenders in the space has fundamentally improved the reverse mortgage product, according to industry observers. Home Trust entered the market last year with a commitment to fair treatment of renewing customers, promising not to charge higher rates than those offered to new clients—a practice that had previously disadvantaged long-term borrowers.
Competition has also spurred product innovation across the sector. Bloom Finance has introduced a fixed-for-a-lifetime reverse mortgage rate option and developed a reverse mortgage credit card, expanding the utility of these financial products for Canadian seniors.
Established players are responding to the competitive challenge. HomeEquity Bank has demonstrated its determination to maintain market position by hiring an executive with experience navigating financial crises, signaling their commitment to remaining competitive in this evolving landscape.
Changing Attitudes Toward Retirement Planning
Awram notes that many seniors feel insulted by conventional financial advice suggesting they should downsize their homes. "They like having their home and yard where they've built years of memories," she says. "They don't want to be shuffled into a condo or rental."
The enhanced competition in the reverse mortgage market provides these homeowners with more options to remain in their homes while accessing equity to support their retirement years. As lenders continue to innovate and compete for business, Canadian seniors stand to benefit from improved terms, better rates, and more flexible products tailored to their specific financial needs.
