The Latest on the Mortgage News: Ontario Teachers’ Pension Plan to Purchase HomeEquity Bank

The Ontario Teachers’ Pension Plan Board has taken a significant stake in Canada’s fast-growing reverse mortgage market with the acquisition of HomeEquity Bank.

Ontario Teachers’, the largest single occupation pension plan in Canada, with over $ 227 billion in net worth, announced Wednesday that it has signed an agreement to purchase Birch Hills Equity Partners Management, the parent company of HomeEquity Bank .

HomeEquity Bank is Canada’s largest reverse mortgage lender with a 30 year history of helping Canadians access equity in their homes.

“HomeEquity Bank is a great fit with our growing portfolio of leading financial services companies,” said Karen Frank, Ontario Teachers’ senior managing director of equities, in a press release. “We believe the company has a quality management team, a solid value proposition for consumers, and room to grow its business in light of Canada’s aging population and the increasing appeal of home living as we age.”

HomeEquity, like its main competitor Equitable Bank, has seen strong growth in recent years as more seniors rely on rising property valuations to support them in their retirement years. In 2020, HomeEquity closed a record $ 830 million in reverse mortgage loan origination, up 39% over the past three years.

In June 2021, the bank was managing more than $ 5 billion in reverse mortgages.

“This record-breaking growth shows that the appetite for reverse mortgage products is growing as millions of homeowners 55 and older recognize the tremendous value and flexibility they offer,” said Steven Ranson, President and CEO of HomeEquity Bank, in a statement earlier this summer .

The bank’s investigation found that more than a quarter of homeowners over 55 would consider tapping into their home’s equity to fund their retirement. As a result, the reverse mortgage market in Canada is projected to grow by an additional $ 1 billion in 2021 alone.

The transition will not have an immediate impact on day-to-day operations and the bank’s existing relationships or contracts will not change, said Yvonne Ziomecki, EVP and Chief Marketing Officer of HomeEquity Bank.

“Ontario Teachers’ has long invested in successful financial services companies in Canada and internationally and we look forward to supporting HomeEquity Bank in its next phase of growth,” added Frank.

The deal is expected to close in the first half of 2022.

BMO, National Bank Lower 5-year fixed interest rates

BMO and National Bank of Canada are the latest of the Big 6 banks to cut mortgage rates.

The moves follow last week’s rate cuts announced by RBC, TD, CIBC and HSBC.

According to data from RateSpy.com, BMO has cut its 5-year uninsured fixed rate by 25 basis points to 2.19% and its 5-year fixed rate (high rate) by 35 basis points to 1.99%.

The National Bank of Canada, meanwhile, cut its uninsured 5-year fixed discount rate by 5 basis points to 2.39%.

Of the Big 6 banks, TD is currently promoting the lowest 5-year insurance rate at 1.89%.

Elevated inflation could last up to two years: BMO Economics

According to an analysis by BMO Economics, upward pressure on wages, along with house, food and energy prices, could push Canada’s inflation rate to 3% in the next two years.

The first level of inflation, the “extreme base effects and the reopening jumps” were like the “booster rocket that is now being dropped,” wrote Douglas Porter, chief economist at BMO.

“However, the potential second stage missiles are all staring us in the face,” he added.

These longer-lasting effects could come from three sources, Porter explained:

  • Wage pressure: 41% of small businesses report rising wages and 28% say quality of work is their biggest concern.
  • High home prices: Home prices take 12 to 18 months to affect the consumer price index and make up almost a quarter of the index.
  • Strength of energy and food prices: This is partly influenced by extreme weather conditions.

“… If you’re looking for some comforting words to talk about inflation, it’s probably best not to turn to us – similar to the US, our calls are at the high end of the consensus, with Canadian CPI averaging around this year and next 3% is, ”Porter wrote. “Canada has not seen a single year with an average inflation rate of 3% or more since 1991, let alone two years in a row.”

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