Introducing You To Mortgage Lenders In Canada

• The majority of Canadians still get a mortgage from a bank, but there are other mortgage lenders that may offer more competitive rates or make it easier to qualify for a mortgage.
• Alternative mortgage lenders, including credit unions and mortgage finance companies, are increasingly popular among Canadian homebuyers seeking flexible mortgage solutions.
• Non-bank lenders may provide tailored options for borrowers with non-traditional financial situations.

Most of Canada’s outstanding residential mortgage balances can be found at the big banks. The chart above displays the distribution of residential mortgage balances in Canada for Q2 2024, totaling $2 trillion. Major mortgage lenders include RBC (21.7% of the market, $433.3 billion), Scotiabank (14.5%, $289.4 billion), and TD (13.4%, $268.7 billion). Other significant players are CIBC (13.2%, $264.5 billion), BMO (7.6%, $151.8 billion), and Desjardins (6.2%, $125 billion). Smaller lenders include Equitable, Manulife, ATB, and Laurentian Bank. Others make up the remaining 15.8% of the market. This mortgage statistic highlights the concentration of outstanding mortgage debt among Canada’s largest lenders.

While most outstanding Canadian mortgages are held by the biggest banks, an increasingly larger proportion of new mortgages are coming from non-bank lenders. However, most Canadians still get their mortgages from a bank, with 57% of new mortgages in Canada coming from the country’s banks. This includes big banks like Royal Bank of Canada (RBC), Toronto-Dominion Bank (TD), and Scotiabank.

Credit unions are also a popular option for Canadians looking for a mortgage. 21.88% of new mortgages in Canada are issued by credit unions. Other lenders, such as mortgage investment entities (MIE), mortgage finance companies (MFC), insurance companies, and trust companies, make up the remaining amount of new mortgages in Canada. These lenders are typically more specialized and may offer unique products.

Currently, the lowest mortgage rate offered by the big 6 banks, namely RBC, Scotiabank, CIBC, TD, BMO, and National Bank, is a 5-year fixed rate mortgage at 3.99% by CIBC. The big six banks often don’t have the lowest mortgage rate in the market, but they are still popular choices for mortgage seekers due to their reputation and stability. Here are the lowest mortgage rates offered by the big 6 banks, by term.

Rising variable mortgage rates have lengthed the amortization period of some mortgages, while high home prices and affordability issues are also causing borrowers to select longer amortizations to reduce monthly payments.

Over the past two years, the majority of new mortgages at chartered banks had an amortization greater than 25 years.

It’s estimated that each month, around 1.28% of all Canadian mortgages will be up for renewal until October 2024. That number will rise after October 2024 to 1.52% of all mortgages each and every month, until April 2025.

That’s because many Canadians renewed their mortgages during the low-interest years of 2020 and 2021. Most of them have terms of 5 years or less and will be coming up for renewal soon. Unfortunately, they’ll be renewing during a period of higher interest, which could shock many homeowners.

In addition to the Big Six, Canada boasts a diverse landscape of smaller banks. These chartered banks can also have competitive mortgage rates and serve regional or niche markets.

Credit unions have been steadily increasing their presence in Canada’s mortgage industry, growing from 15% of all new mortgages in 2020 to 22% of all new mortgages in 2023.

The rise in popularity of credit unions can be attributed to their unique structure and customer-focused approach, but unlike banks, credit unions aren’t required to stress test their mortgage applicants. This allows credit unions to be more flexible and work with borrowers who may not meet the stricter requirements of traditional banks.

As a result, credit unions are now an increasingly attractive options for borrowers that are often overlooked by traditional banks. This includes self-employed individuals, new immigrants or those with lower credit scores.

Credit unions operate provincially in Canada, which means that you can’t get a mortgage from a credit union based in another province. However, with almost 200 credit unions and over 1,600 credit union locations across Canada, there is likely one near you that can provide personalized and competitive mortgages to meet your needs.

Mortgage Finance Companies (MFCs) are a type of non-bank mortgage lender in Canada. Unlike private mortgage lenders, which aren’t subject to the same regulations as traditional banks and allow for them to have more flexibility in their lending practices, MFCs are subject to federal regulations. That’s because most mortgages MFCs lend out are insured mortgages, including those that use government-backed mortgage insurance by CMHC. You will typically need to work with a mortgage broker to get a mortgage from a MFC.

Having a credit score of less than 600 can make it difficult to obtain a mortgage, as it is considered a low credit score. This indicates that the borrower may have had trouble managing their credit in the past or currently has financial instability.

Many traditional lenders, such as banks and credit unions, require a minimum credit score of 680 or higher to qualify for a mortgage. Borrowers with a credit score less than 680 may have to seek alternative lending options, which may come with higher interest rates and fees. Examples include B-lenders and private lenders.

Private mortgage lenders are an option that many borrowers with bad credit turn to. These lenders often have more flexible requirements and may be willing to work with borrowers who have a lower credit score, but this usually comes at a higher cost. Many private mortgages are interest-only, which means the borrower is only required to pay the interest on the loan each month and not the principal. This reduces the size of their mortgage payments, but borrowers aren’t building any equity or paying off their loans.

According to the Financial Services Regulatory Authority of Ontario (FSRA), 10.6% of new mortgages in 2021 in Ontario by mortgage brokers were for private mortgages. That adds up to $22.4 billion in 2021 alone.

Mortgage Investment Corporations (MICs) are a type of private mortgage lender, and they are gaining popularity in the mortgage industry as an alternative investment option. According to the CMHC, Mortgage Investment Entities (MIEs), which include MICs, accounted for 13% of all new mortgages in Q1 2023. That’s a big jump from the 8% market share seen in Q1 2020.

MICs allow individual investors to pool their funds together and invest in a portfolio of mortgages managed by professionals, providing diversification and risk management. Popular publicly traded MICs in Canada include Atrium Mortgage Investment Corporation and MCAN Financial Group.

MICs often invest in mortgages with a low LTV ratio, at a higher interest rate. In 2020, the CMHC found that the average mortgage at MICs had an LTV ratio of less than 57%. Meanwhile, the average interest rate was over 9%!