Thermite composites are lightweight and high-strength multifunctional energetic structural materials with a high reaction energy. In this study, the shear induced reaction of Al-Fe2O3-epoxy thermite composites using a modified BAM Fallhammer tester is investigated. The standard BAM Fallhammer tester is modified for better transport of impact energy under low velocity impact conditions. The mean Al particle size and the volume ratio of Al to Fe2O3 are varied using the factorial design of experiments to find their effect on the reactivity. From the experimental results, we observed that the epoxy binder increases the reaction sensitivity of the thermite mixture. Also, the composites containing smaller sized Al particles exhibit increased reaction sensitivity, whereas the sensitivity of the composites containing larger Al particles is higher in the fuel-rich (non-stoichiometric) composition compared to the stoichiometric composition.