Monday Market Minute | Jan 28, 2019
Mortgage investment corporations report strong Q1 pipelines as B-20 and tighter bank underwriting push borrowers to alternative lenders.
What Moved
Multiple Canadian mortgage investment corporations reported robust origination pipelines entering 2019. Industry estimates suggested the non-bank lending market grew 10-15% in 2018, driven by B-20 displacement and tighter bank underwriting standards for self-employed and new-to-Canada borrowers. Romspen Mortgage Investment Fund and other large MICs maintained steady distributions, reinforcing investor confidence in the sector.
Why It Matters
For private markets allocators, MICs offered a compelling risk-return profile: first-mortgage security on Canadian real estate, yields in the 6-9% range, and low correlation to public equity volatility. The B-20 displacement was not a temporary blip but a structural reorientation of mortgage origination. Investors with exposure to well-managed MICs benefited from expanding deal flow without incremental credit risk.
Signal to Watch
The BoC's next rate decision on March 6 would determine whether the overnight rate remained at 1.75%. A hold would further entrench the conditions supporting MIC origination — stable borrowing costs paired with constrained bank supply.