I’m sure that your first thoughts upon reading this article title are “Wait! What has Brexit got to do with reverse mortgages in Canada!”. Well there is an impact and that’s what I would like to explain in today’s article.
The backstory to how Brexit has impacted the reverse mortgage market in Canada is the fall of the Pound.
Immediately following the Brexit vote, the Pound fell off a cliff. It has since fallen a little further too and currently now sits (as of today) at being worth 1.71 Canadian Dollars (in reverse, one Canadian Dollar is worth 0.58 Pounds).
Here is the chart showing the last month – you can see this fall yourself:
And here is a chart showing the last 10 years – the British Pound is approaching the lows it saw during the 2008 global financial crisis (when the UK banks had to be completely bailed out, while Canadian banks did not):
There are around 675,000 UK citizens living in Canada just now (not the largest expat community – that would be the 1.2 million UK citizens in Australia).
A lot of UK citizens receive UK pension income from the UK – this income is sent over and therefore converted into Canadian Dollars. The fall of the Pound means that these pension holders will now be receiving over 10% less per month than they previously did.
And this is where reverse mortgages come in. Reverse mortgages are particularly well suited to anyone who needs additional income and has significant value tied up in their home.
In the UK, a reverse mortgage is called an ‘equity release’. And in Japan it is called a ‘home pension’. This differs to Canada where the term reverse mortgage was coined – this can put off people from using this option as the word ‘mortgage’ has negative connotations.
In response to the market volatility in the UK, ‘equity release’ enquiries have seen a 44% increase. We would expect that the same might happen with reverse mortgages in Canada given the high number of UK citizens living here – and we have already seen this…
We already know of a reverse mortgage recipient who needed about $500 a month to comfortably live in their condo. Unfortunately, their UK pension had fallen – due to the drop in the pound outlined above.
So a ‘reverse mortgage line of credit’ was setup (this is a product where the reverse mortgage is like a line of credit and you can take out the funds as you need them) to help them out. They can take the full $500 a month, take more or even take less (nothing) if they want to – it has given them the flexibility to deal with this income fall as they wish.
So for UK retirees living in Canada, a reverse mortgage could be a very good solution to any reduction in pension income that they have seen since the fall of the Pound.
If you are thinking about taking out a reverse mortgage in Canada, we can help. We provide free information and advice to help you through this important financial decision. These are completely different, whether you are talking about the UK or Canada or the USA (for more on Canada vs the USA, see our article at https://www.reversemortgagepros.ca/canada-vs-usa/.
Original Article: https://www.reversemortgagepros.ca/canada-vs-usa/