The CHIP Reverse Mortgage as your Debt Consolidation Solution

Canadians are choosing to carry more and more debt

For many Canadians, borrowing money has become an increasingly necessary means of keeping up with ongoing expenses. Whether it’s a traditional mortgage to get into a home, a line of credit to cover a major purchase or unexpected expense, or credit cards to pay monthly bills, many Canadians find themselves plagued by a high debt load at one time or another.

A high debt load is often caused by more than just spending or saving habits. Climbing costs of living combined with a slowing economy have further tightened many Canadians’ cash flows. The reality of the COVID-19 situation is that many Canadians will need to increase their debt to cover their monthly expenses, but there are no-payment options available to help them manage and consolidate these debts while increasing their cash flow at the same time.

Why consolidate your debts?

It can be a stressful experience to manage debt from multiple sources. With varying interest rates, due dates, and payment methods, many Canadians become overwhelmed by the sheer effort of keeping up with their debt’s demands. That’s why debt consolidation is such a popular strategy: It makes paying down the debt much more efficient and manageable by rolling multiple high-interest debts into a single sum with lower interest and reduced minimum payments. It helps you get out of debt faster and protect your credit score.

But with so many different debt consolidation solutions available, it can be difficult to decide which option is best for you.

The reverse mortgage advantage

For 55+ Canadian homeowners, a reverse mortgage is a great option to consolidate debt, especially during retirement. In these uncertain times, where investments and the economy have taken a major hit, many retirees will experience a monthly “income gap” where taking on additional debt is the most accessible option to cover the difference. And while retirees may have trouble increasing their income in retirement, the equity held in their home can be leveraged to consolidate their debts into one loan.

If you are a Canadian 55+ and own your home, the CHIP Reverse Mortgage® from HomeEquity Bank could be an excellent option for you. You can get up to 55% of the value of your home in tax-free cash (either lump sum or planned advances), and with a reverse mortgage, the interest rates are a fraction of what you pay with the average credit card. For these reasons, a CHIP Reverse Mortgage presents a fantastic debt consolidation opportunity – but there’s another major benefit to the reverse mortgage you may want to consider…

Say “So long” to making monthly payments

The CHIP Reverse Mortgage frees you from the burden of having to make monthly payments or interest payments until you decide to sell your home (or if you and your spouse pass away). Without these ongoing monthly payments, you’ll be free to focus on what really matters in retirement: Making the most of your daily life by doing what you love, with those you love.

For 55+ Canadian retirees, there’s only one debt consolidation solution that minimizes accumulating debt, reduces financial stress, and increases disposable income without having to make monthly payments or sell or lose ownership of your home: The reverse mortgage.

Want to know more about using the CHIP reverse mortgage as a debt consolidation tool? Contact your DLC Mortgage Broker for more information.

Posted by: Agostino Tuzi
National Partnership Director, Mortgage Brokers
HomeEquity Bank

Agostino Tuzi

Agostino Tuzi is the National Partnership Director, Mortgage Brokers at HomeEquity Bank.

Canadian Home Sales and New Listings Recover One-Third of Pandemic Loss in May

Record Gains in Canadian Home
Sales and Listings in May

There was good news today on the housing front. Home sales surged by a record 56.9% in May from April’s unprecedented collapse. Data released this morning from the Canadian Real Estate Association (CREA) showed national home sales recovered roughly one-third of the COVID-induced loss between February and April (see chart below). On a year-over-year (y-o-y) basis, sales activity was still down almost 40%, but the jump in sales and an even larger surge in new listings shows pent-up demand remains for housing as buyers wish to take advantage of historically low mortgage rates.

Transactions were up on a month-over-month (m-o-m) basis across the country. Among Canada’s largest markets, sales rose by 53% in the Greater Toronto Area (GTA), 92.3% in Montreal, 31.5% in Greater Vancouver, 20.5% in the Fraser Valley, 68.7% in Calgary, 46.5% in Edmonton, 45.6% in Winnipeg, 69.4% in Hamilton-Burlington and 30.5% in Ottawa. Not surprisingly, the cities with the smallest gains posted the smallest declines in prior months.

More importantly, anecdotal data suggest that housing activity has been steadily rising from the middle of April until the first week in June.

New Listings

The number of newly listed homes shot up by a record 69% in May compared to the prior month with gains recorded across the country.

With new listings having recovered by more than sales in May, the national sales-to-new listings ratio fell to 58.8% compared to 63.3% posted in April. While this statistic has moved lower, the bigger picture is that this measure of market balance has been remarkably stable considering the extent to which current economic and social conditions are impacting both buyers and sellers.

There were 5.6 months of inventory on a national basis at the end of May 2020, down from 9 months in April. The temporary jump in this measure recorded in April reflected the fact that sales were expected to fall right away amid lockdowns; whereas, other variables like active listings would be expected to fall at a much slower pace. The CREA report suggests many sellers who already had homes on the market before mid-March may have left the listings up for now but drastically curtailed the extent to which they were showing their homes during the lockdown. With many of those now coming off the market, overall active listings have fallen by about a quarter as of the end of May, bringing them down among the lowest levels on record for that time of the year.

Home Prices

Home prices were little changed in May compared to April across Canada. Of the 19 markets tracked by the MLS Home Price Index (HPI), 18 recorded either m-o-m increases or smaller decreases than in April. Five markets posted price gains in May following a decline in April (see the table below for local details).

In general, since the pandemic crisis began small declines in prices have been posted in British Columbia while declining trends already in place in Alberta have accelerated. With the recent surge in oil prices, however, sales activity has actually improved across the Prairies and price trends have been stabilizing.

Despite the pandemic, home prices in the Greater Golden Horsehoe area around and including Toronto have fallen very little and remain well above year-ago levels. In Ottawa, Montreal and Moncton, prices have continued to climb, albeit at a slower pace than before.

Dr. Sherry Cooper

Chief Economist, Dominion Lending Centres
Sherry is an award-winning authority on finance and economics with over 30 years of bringing economic insights and clarity to Canadians.

Governor Macklem Affirms No Negative Interest Rates

First Formal Remarks By Tiff Macklem, Bank of Canada Governor

There were no surprises this morning from Governor Macklem’s virtual presentation to the Canadian Clubs of Canada. His opening written statement was quite brief and it was followed up with a Q and A. Here are the key points that he emphasized.

• Negative interest rates are off the table as they “lead to distortions in the behaviour of financial markets.”
• Therefore, no additional Bank of Canada rate cuts is coming.
• The BoC will continue its securities purchase program to provide liquidity to financial markets.
• In response to questions, he said he expects lasting damage to demand and supply in the economy. He said the recovery will be “long and bumpy” and “slow and gradual”.
• The inflation target of 2% will remain the beacon for BoC policy. Currently, inflation is below target.
• “This recession is a deep one. Women have been particularly hard hit because they work disproportionately in the hard-hit service sector and women are disproportionately caring for children and the elderly”.
• Fiscal support programs lay the foundation for the recovery of particular groups.
• Oil-producing regions are hard hit by the oil price shock. The price of oil has moved up recently to WTI $40, but the pandemic clearly “weakens oil demand”.
• Household debt levels are a concern. Fiscal transfers help and households have reduced their spending. The role of the BoC is to provide the required stimulus to encourage households to spend. The macroprudential measures already in place will discourage highly indebted households from taking on more debt.
• He expects “pretty good growth in jobs and GDP in Q3”. Beyond that is more uncertain as we will need to repair the economy.
• All institutions must speed up actions to deal with climate change, including the BoC. We will need to get a handle on the implications of this for the economy.
• Chartered banks are more conservative in their lending practices since the pandemic hit. The securities-purchase programs are intended to keep credit flowing from the banks. The banks are an important shock absorber during this recession. Conditions in financial markets are much improved since the beginning of the crisis. “Markets have normalized and credit is flowing more freely”.
• Both the government and the BoC have introduced extraordinary programs to deal with this crisis. He said, however, that we could use “additional international assistance and cooperation”.
• Real estate question–How much risk does this sector represent? The Governor commented that different sectors will behave differently Warehouse and fulfillment centre demand is quite strong. Commercial real estate outlook is uncertain– particularly office space and shopping malls. Housing–he commented that “sharp drops in housing activity” has led to “little change in prices” thus far. This will vary by region and type of housing in the future.  
• “The pace of change is accelerating. Societies around the world are having trouble keeping up. The central bank must get ahead of this” and be prepared for the unknowns, be agile and resolute.
• Asked about the potential for a second wave of a pandemic, he said, “The outlook is fraught with uncertainty. The biggest uncertainty is the course of the virus. There will be increases in the number of cases. We need testing and tracing with quick responses locally. We need to determine how to open up safely.”
• When asked for his last word, he said, “We are going to get through this. Canadians are resourceful, business ingenuity is strong, this will be a long slow recovery and there will be setbacks. We have avoided the worst scenario. Not all jobs will come back. The Bank is laser-focused on supporting this recovery and getting Canadians back to work”.

Dr. Sherry Cooper

Chief Economist, Dominion Lending Centres
Sherry is an award-winning authority on finance and economics with over 30 years of bringing economic insights and clarity to Canadians.