Reverse mortgage rates fall in Canada as regular mortgage rates rise

Reverse mortgage lenders in Canada cut 5-year fixed rates by 0.25% in July 2026 even as regular mortgage rates moved higher and the Bank of Canada held steady. The move has narrowed the spread between reverse mortgages, conventional mortgages and HELOCs to a rare level, but the pricing may not last.

Why it matters: - Reverse mortgage borrowing costs in Canada have moved closer to regular mortgage rates and HELOCs than usual. - The narrower gap could make reverse mortgages more attractive for homeowners 55 and over who want to tap home equity. - The pricing shift appears to be driven by lender competition, not by broader rate relief in the market.

What happened: - Reverse mortgage rates fell 0.25% across almost every lender in Canada in July 2026. - Home Trust cut its 5-year fixed reverse mortgage rate to 6.29% in early July 2026. - Equitable Bank followed with a 5-year fixed rate of 6.28%, slightly below Home Trust. - Regular mortgage rates moved in the opposite direction over the same period. - The Bank of Canada left its policy rate unchanged.

The details: - The usual driver for 5-year fixed rates is the 5-year Government of Canada bond yield. - That yield has risen about 0.2% since the start of 2026. - Regular mortgage rates followed that yield higher. - Reverse mortgage rates did not follow the same pattern. - Reverse mortgage rates typically run 2% to 2.5% above regular mortgage rates. - Four of the Big Five banks are offering regular 5-year fixed mortgage rates around 4.29%. - TD is offering 4.59% on a regular 5-year fixed mortgage. - The current reverse mortgage spread is near the low end of its usual range, and in some cases slightly below it. - Against a HELOC, reverse mortgage rates usually range from 0.5% below to 1% to 1.5% above. - With HELOCs near Prime plus 1%, or 5.45%, the latest reverse mortgage pricing puts the gap at just over 0.8%. - That gap was a little more than 1% before the rate cuts. - Mich Sneddon, founder of Reverse Mortgage Pros, said the change reflects a lender trying to win business and competitors following suit. - Sneddon said the move is good for homeowners but may not last. - Sneddon also said homeowners should understand why rates are moving before assuming the pricing will hold.

Between the lines: - The rate cuts do not appear to be tied to lower funding costs, which makes the move more of a market-share play than a broad market reset. - Home Trust is the newest lender in Canada’s reverse mortgage space, which likely adds pressure on established lenders to defend volume. - Lenders that cut rates to win business often do so with a specific volume target in mind. - Once that target is reached, rates often move back up. - Home Trust has no prior track record in this market for this kind of pricing strategy.

What's next: - The current pricing window may close if lenders hit volume targets or if competitive pressure eases. - Future rate moves will likely depend more on lender behavior than on the bond market unless yields change materially. - Homeowners 55 and over can use a free, no-obligation assessment from Reverse Mortgage Pros to compare options, lenders and hidden costs at Reverse Mortgage Pros assessment.

The bottom line: - Reverse mortgage rates in Canada have rarely looked this competitive versus regular mortgages and HELOCs, but the discount may be temporary.