HomEquity Bank has reduced its variable rate on CHIP Home Income Plans to 3.75%, the company said Monday.

The lower cost of borrowing gives seniors more flexibility in how their home equity can be used to enhance their retirement lifestyles, HomEquity says.

The lower rates are made possible by HomEquity Bank’s debut last month as Canada’s newest chartered bank. In becoming a Schedule I Bank, the company has gained immediate access to retail deposits sourced through deposit brokers, both diversifying its sources of funding and lowering the cost of borrowing.

“Becoming a Schedule I Bank has allowed us to lower our rates because we now raise funding the same way that other banks do,” explains said Greg Bandler, senior vice president.

A reverse mortgage is designed for Canadian homeowners 60+ who wish to tap into the equity built up in their homes. The new 3.75% rate positions CHIP Home Income Plan as an attractive long-term home equity based borrowing solution. Customers will find it less expensive to create additional cash flow to supplement monthly income. Seniors can preserve existing assets by using CHIP funds to avoid RRIF withdrawals above the annual minimum or the sale of non-registered investments. They can also choose a reverse mortgage to discharge existing debts to increase monthly cash flow.

HomEquity Bank also offers a discount program that further reduces the interest rate on a CHIP Home Income Plan to as low as 3.25% to customers who pay their full interest annually.