Regulator highlights key trends in province-wide mortgage lending
Ontario’s private mortgage market experienced a modest decline in 2024, but it continues to serve as a key financing avenue for many homebuyers, according to the latest annual report from the Financial Services Regulatory Authority of Ontario (FSRA). The report reveals that a softening in interest rates prompted a shift, with more borrowers seeking traditional mortgage options.
Overall mortgage activity saw slight growth in 2024, with the total number of mortgages in the province increasing to 414,082 and the dollar value reaching $256.0 billion. This increase was driven by a 1% rise in traditional mortgages, which offset a 1% drop in private mortgages. As a result, the market share of private lenders decreased to 15.8% by number of mortgages and 12.5% by dollar value.
Rising delinquencies, heightened risk
Despite the dip, FSRA notes that private lending maintains an “important role in Ontario’s mortgage market,” particularly for individuals unable to secure financing from traditional banks. However, the report highlights growing risks for both borrowers and investors. Data from Statistics Canada’s Survey of Non-Bank Mortgage Lenders shows that the mortgage delinquency rate for these lenders reached 0.20% by the third quarter of 2024, up from 0.14% in the same period two years earlier. For Mortgage Investment Entities (MIEs), the delinquency rate was significantly higher, rising from 0.76% in Q1 2022 to 1.22% in Q3 2024.
The FSRA report warns that private mortgages often come with higher fees, shorter terms, and interest-only payments, which can expose financially vulnerable individuals to increased risk.
Protecting vulnerable borrowers
FSRA has maintained a supervisory focus on private mortgages as delinquency rates have risen and borrowers face increased financial pressure. The regulator’s second annual report is part of its effort to ensure consumers receive suitable recommendations and understand the risks. Antoinette Leung, FSRA’s executive vice president of market conduct, explained the regulator’s goal in a statement: “Our goal is to ensure that when consumers turn to private options, both the borrowers and investors/lenders understand the risks and receive suitable recommendations from mortgage professionals that support long-term financial stability.”
Encouragingly, a 2024 FSRA consumer survey found that 60% of vulnerable consumers who used a mortgage broker for a private loan had discussions about an “exit strategy” to transition back to a traditional mortgage. This represents a positive improvement from a 2023 study, where 43% of such borrowers lacked a clear exit plan. This finding suggests that FSRA’s supervision and consumer education initiatives are having a tangible impact.
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