This is despite the sector’s total market share remaining miniscule
Mortgage investment corporations have come into their own as a less risky source of lending, despite the sector seeing some slowdown during the pandemic year, according to the Canada Mortgage and Housing Corporation.
In 2020, the total market of mortgage debt held by MICs stood approximately between $13 billion and $14 billion, while the sector’s lending increased by 3.1% during this period. This rate was a slower pace compared to the rest of the residential mortgage industry (7%), and MICs’ share of all outstanding mortgages remains at around 1% to 2% of the whole mortgage market.
“The overall risk profile of the alternative lending sector remained relatively in line in 2020 with what was observed in 2019. However, the data suggests that larger entities had a slight increase in the overall risk of their mortgage portfolio, while smaller MIC lenders showed lower overall risk,” CMHC said. “The overall portfolio of MICs (including small and large entities) indicated an overall decrease in risk in the first quarter of 2021.”
Read more: Canada’s Big Six banks – what’s happening with their share of mortgages?
The average loan-to-value (LTV) ratio in this sector remained stable over 2019 and 2020, for larger (59%) and smaller MICs (64%) alike. This ratio fell to 58% across all MIC types in Q1 2021, continuing the downward trend in MIC LTVs that began in 2016, CMHC said.
“The lower LTV ratio suggests that a larger share of the debt can be recovered by the lender in case of a foreclosure, and that lenders are less exposed to house price depreciations,” CMHC said.
