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More retirement-age Canadians are still paying off a mortgage, and financial advisers say rising interest rates will make it even more challenging for Canadians to pay off their home before they retire.

The number of people older than 65 with an outstanding mortgage in their residence increased from 1.2 million to 1.5 million between 2016 and 2021 according to Statistics Canada, although the agency noted they don’t measure whether others residing in the home are contributing to mortgage payments. However, the number of seniors living alone with a mortgage also grew, from roughly 181,000 to 220,000 in the same time frame.

Canada Mortgage and Housing Corp. data also showed an increase in the share of people aged 65 and older with a mortgage. People in that age group accounted for 10 per cent of mortgages in 2017, and 13 per cent of mortgages in 2022. The age group also accounts for 9 per cent of the country’s outstanding mortgage balance, compared with 7 per cent in 2017.

Furthermore, a 2022 survey of more than 1,500 people conducted by Angus Reid and commissioned by two financial advising firms found that 40 per cent of respondents either planned to delay or have already delayed retirement because they were carrying too much debt.

Jason Heath, managing director of Objective Financial Partners, a fee-only financial planning firm in Markham, Ont., said the trend of more retirement-age people carrying mortgages was first fuelled by years of rapidly increasing housing prices and is now being compounded by rapidly increasing interest rates.

“There’s a whole cohort of people approaching their retirement or young people that have taken on big mortgages that, when I work with them to plan for retirement, it’s quite clear that they’ll never be debt-free on their current home,” said Mr. Heath, who said that some people took on their first mortgages late in their lives, or moved into their dream home too late to be able to pay it off.

“Some of those mortgages had 1.5 per cent or 2.5 per cent interest, and as variable rates rise or fixed rates come up for renewal in the next couple of years, it’ll definitely push up their amortization, so it’s going to be more of a phenomenon.”

This situation backs people into a corner because they often won’t have enough money left over to make other investments and will sometimes base their entire retirement plan around their home equity and government pension, which Mr. Heath said can be a risky strategy.

Deb White, president of the B.C. branch of the Canadian Mortgage Brokers Association, agreed that more people than ever are carrying mortgages into retirement age, and said people’s reliance on their home equity for borrowing isn’t helping either.

For example, Ms. White said many parents will borrow money off the value of their home to help pull together a down payment for their children.

Many people believe it’s the only way the younger cohort can get into the market, she said, adding recent data showed more than 70 per cent of first-time buyers relied on some form of financial support from parents.

In some cases, even homeowners who’ve already paid off their mortgage can find themselves caught off guard. Responding to a callout from The Globe and Mail’s Stress Test podcast, a 40-year-old Toronto woman said she found herself facing an outsized mortgage after having to buy out half of her home’s value following a divorce.

The woman and her ex bought the house for $318,000 in 2008 and paid it off in 2020. When the couple split shortly after, the home had risen in value to $1.1-million, and she barely qualified for a variable rate mortgage to buy out the outstanding $550,000 from her partner.

The woman makes more than $100,000 a year, but still has to rely on financial help from a parent to pay her bills as interest rate hikes drove up her monthly payments from $1,400 to $2,100. She expects to carry the mortgage into retirement. The Globe is not identifying the woman to protect her privacy.

Mr. Heath said people who plan to sell their home and move to a cheaper location should also begin preparing sooner than later. A life-changing move like that is complicated at the best of times but will be even more difficult in old age.

“It’s one thing when you’re 45 to say when I retire, I’ll sell my house and move to the country, but it’s a whole other thing to get there and do it,” Mr. Heath said. Practical concerns such as accessing health care specialists and getting rid of personal possessions can complicate the process.

“It’s harder as you get older to get your head around these changes.”

Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast.