Canada Reverse Mortgage Rates Climb as Bond Yields Hit Two-Year High

Reverse mortgage rates in Canada have begun to rise, driven by higher bond yields. This development is significant for homeowners aged 55 and over who are considering a reverse mortgage. According to a recent report from Homestead Financial, one of Canada's four major reverse mortgage lenders has raised its five-year fixed rate by 0.55 percentage points since August 31.

The largest lender, HomeEquity Bank, increased its advertised five-year fixed rate on the CHIP Reverse Mortgage from 6.39 per cent to 6.94 per cent effective August 31. This move widened the gap between the lowest and highest advertised rates to 0.71 percentage points, the widest it has been this year.

The increase in reverse mortgage rates is due to rising Government of Canada bond yields, which have climbed from around 3.03 per cent in early July to 3.65 per cent on September 11, their highest level since May 2024. While the Bank of Canada held its policy rate at 2.25 per cent, this move does not directly affect reverse mortgage rates.

Richard Hopkins, an Ontario mortgage broker, notes that homeowners may assume their reverse mortgage rate has not changed if the Bank of Canada did not raise its rate. However, the bond market is a key driver of these rates, and one lender has already passed on the increase to borrowers.