These alternative lenders, which make up about 1.5 per cent of Canada’s mortgage market, drew investors looking for high returns as interest rates hit rock bottom in recent years. But with rates rising rapidly under a Bank of Canada tightening cycle this year, investors have sought higher-yielding, safer assets.
“We’re going through a period now where investors are more cautious as to how alternative and, really the overall real estate market, is adjusting to higher interest rates,” said Dean Koeller, president of Calvert Home MIC and chairman of the Canadian Alternative Mortgage Lenders Association.Article content
The struggles of MICs and other private lenders could indirectly contribute to vulnerabilities in the financial system, the Bank of Canada said in alast year, although the sector’s small size means the direct impact from its troubles is small. Still, any tremors felt by MICs could affect bigger lenders, from whom MICs borrow funds.
If MICs were to make loans even more expensive to attract investors, any potential rise in unemployment could push borrowers into default, leaving all the parties worse off, he said.
Not surprised ? They aren't being charity? Things were great as long as real estate continued to inflate