Sector count could shrink as acquisitions rise and weaker firms lose steam
Canada’s financial and mortgage markets have seen their fair share of mergers and acquisitions in recent years – a trend that’s set to continue as lenders eye expansion, according to a capital advisory firm executive.
Alternative lending has played an increasingly prominent role in the mortgage space over the past decade with a growing number of borrowers turning to the sector thanks to qualification challenges with top banks.
And Benjamin Sammut (pictured top), principal at Dabble Capital Advisory, told Canadian Mortgage Professional it wouldn’t be a surprise to see more companies joining forces to boost their firepower in the alt-lending field.
Growth-focused lenders prioritize expansion
“We’re going to see a lot more strategic, cooperative – not necessarily mergers, but more strategic partnerships that are going to come up between lenders as they play well with each other and the level of sophistication and reporting burden starts to grow for them,” Sammut said.
“I think a couple of lenders that were in trouble over the last few years are really going to see their reckoning in 2026 and 2027 – and that’s just going to frankly cull the herd. So that way, the good lenders that have that growth potential and sophistication can really make an impact the way they want to.”
Smaller funds may well choose to stay in their specific niche and eke out growth there. But Sammut also highlighted the ambition of other lenders to expand steadily in the years ahead.
“There are some lenders that really do want to make an impact in the market and some of them have the scalability, sophistication, and means to grow by a couple of hundred million dollars, if not a billion dollars a year, and ultimately become what we would have seen 15, 20 years ago with [other lenders expanding],” he said.
Alternative lending space diverging between haves and have-nots
Some smaller alternative and private mortgage lenders have faced well-publicized challenges in recent times, particularly in Ontario, with purchase volumes down and overall sales affected.
Mortgage delinquencies are still low by historical standards but have been inching upwards in 2025 in Ontario and BC, with Ontario’s rate higher than the national average for the first time in at least 13 years.
And there’s no sign that trend will shift anytime soon. The national housing market is still frozen, would-be buyers continue to grapple with affordability challenges, and economic uncertainty is keeping plenty on the sidelines.
Brokers and other industry members are sceptical the rise in delinquencies marks a grave threat to the mortgage market. But it’s still presenting problems within the industry.
Cooling deal volumes may continue to weigh against middling lenders’ prospects in 2026 if the market’s performance remains muted.
Still, the outlook remains brighter for larger alternative lenders. According to Canada Mortgage and Housing Corporation (CMHC), the nation’s largest 25 mortgage investment entities (MIEs) grew assets under management by 6.5% in the second quarter, setting a faster growth pace than the residential mortgage market.
“There are some funds who have neither niched down nor grown,” he said, “and they’ve sort of slid by. Maybe for some, rates have saved them. Maybe some have very strong investor relationships that have saved them, although it’s not necessarily the best investment for those investors.
“But I think in 2026, you’re really going to see the haves and the have nots in terms of who now has access to larger, more strategic investment, who has access to sophisticated things like bond markets, who has access to the latest technology or ratings agencies if they wanted to do one-off bond issuance.”
On the other hand are those lenders who can’t pursue that upward movement and never will. “So we’re going to see that widening gap,” Sammut said, “between those that are scaling to become true financial institution models and those that are going to niche down into just a private fund, an opportunistic fund that’s going out and getting some mortgages.”
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