A neighbourhood on Burnaby Mountain in Burnaby, B.C. in June, 2024. Higher-risk nature of private mortgages, also known as alternative mortgages, mean they’re significantly more expensive.DARRYL DYCK/The Canadian Press
Homeowners are turning to private mortgage lenders more often and staying with them longer as higher interest rates and falling home values see borrowers failing to qualify with traditional lenders.
Private mortgages, also known as alternative mortgages, are a loan for homeowners who don’t meet income or credit requirements for traditional mortgages from banks and other financial institutions.
The higher-risk nature of the loans mean they’re significantly more expensive. Some of the cheapest advertised alt-lending rates for a three-year fixed mortgage at private lender Home Trust Co. were priced at above 6 per cent, and at 7.59 per cent at National Bank’s alternative mortgage division. Traditional three-year mortgages are currently around 4 per cent.
The high cost of borrowing means that homeowners often used private mortgages for a one-year term and move to a traditional lender as soon as possible. However, falling home values and increasing mortgage rates have pushed clients to sign for three-year terms much more often to try and shield themselves from volatility in the housing market, said Pierre Martin, vice-president of residential mortgage lending at Home Trust.
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Jake Bannister, senior sales manager at Glasslake Funding said the share of customers who renew with the private lender instead of qualifying for a traditional mortgage is increasing. He said roughly three-quarters of them are renewing, up from 50 per cent in the past.
He added that some borrowers in major Canadian cities are dealing with decreasing home values, which sometimes leads to gaps in which a property is worth less than the loan upon renewal. In such cases, homeowners must fork up thousands of dollars to cover the difference.
“Previously, people were banking on short-term appreciation, which ultimately hasn’t materialized,” Mr. Bannister said.
The private mortgage industry has been growing as the Canadian housing market deals with a wave of pandemic-era homebuyers who have renewed into high interest rates over the last year. The impact was worst in major cities such as Toronto and Vancouver.
“There is a cohort that was stretched to the limit at the peak time of the market and is experiencing challenges now, that’s the cohort that’s most impacted right now,” said Bryan Jaskolka, chief executive of CMI Financial Group, a large private lender in Toronto.
The private mortgage industry has grown faster than other lender during the renewal wave. In the fourth quarter of 2025, the 25 largest private mortgage companies saw a 8.6-per-cent growth in their assets under management on a year-over-year basis, compared to just 4.9 per cent growth for the mortgage industry overall, according to data from the Canada Mortgage and Housing Corp.
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It’s an uptick from the second quarter of 2025, when private mortgage corporations saw a 6.5-per-cent increase in their assets under management, compared to a 5-per-cent increase in overall mortgage debt.
CMHC deputy chief economist Aled ab Iorwerth said the trend was concerning.
“My hope is that households could build up the equity in their home over time. That they are struggling to do so suggests they’re in a precarious economic situation and vulnerable to any future slowdown,” said Mr. ab Iorwerth in an e-mail.
“We need to continue to monitor the situation to see whether these risks increase and spill over to the wider economy.”
Private mortgage companies have seen major growth since 2018, when the Office of the Superintendent of Financial Institutions introduced stricter rules for mortgage companies. They’ve emerged as a temporary cushion for people to move toward traditional mortgages, and CMHC data show they still only represent 1.8 per cent of outstanding mortgage loan values in Canada.
Mr. Jaskolka, with CMI, said company’s such as his are meant to be a short-term solution, and an increase in long-term customers isn’t what his organization sets out for.
“We don’t want a homeowner to be locked into an elevated interest rate for four or five years because if the premise is correct, that homeowner should be in a position to migrate to a lower cost loan over a year or two,” Mr. Jaskolka said.
However, Mr. Martin, with Home Trust, said his firm has dealt with clients who’ve returned for 10 years. He said the growth of the private mortgage industry and the fading stigma around alternative loans is positive for self-employed homeowners, who may never qualify for traditional loans.
As the private mortgage industry has grown, Mr. Martin said the rates they’re able to offer have dropped closer to traditional mortgages.
“The gap is way smaller compared to 20 years ago or 30 years ago,” Mr. Martin said.
