With the Bank of Canada’s overnight rate down to 2.75% after seven cuts in less than a year, the private mortgage market is entering a new phase. For Mortgage Investment Corporations (MICs), this shift brings downward pressure on yields, changing borrower risk profiles, and tighter underwriting conditions. Economic indicators become essential tools for MIC managers, providing timely insights to guide portfolio strategy. By closely monitoring these signals, they can proactively adjust risk levels, loan pricing, and geographic exposure to sustain income and safeguard capital amid changing market conditions.
Navigating a New Phase in MIC Investing
Mortgage Investment Corporations pool capital to fund short-term, high-yield residential mortgages, offering investors monthly or quarterly income from interest payments. Operating at the intersection of private credit and real estate, MICs are sensitive to shifts in interest rates, property values and borrower credit quality.
When the Bank of Canada (BoC) lowers its policy rate, Mortgage Investment Corporations (MICs) can face a range of impacts that unfold over time. Although fixed mortgage rates don’t move in lockstep with the policy rate, central bank actions influence overall lending conditions and investor sentiment, which ultimately affects mortgage pricing.
As interest rates fall, MICs face declining portfolio yields because maturing loans are replaced with new mortgages priced at lower rates. Variable-rate loans also reset at reduced levels. To maintain returns, MIC managers may increase risk – for example, by funding second-position loans, extending amortization periods, or accepting higher loan-to-value (LTV) ratios. However, balancing these adjustments with disciplined underwriting is critical to managing risk and preserving income stability.
Meanwhile, housing market trends, such as home prices and inventory, affect the value of the underlying collateral, while employment and wage growth trends impact borrower repayment capacity, especially since many MIC borrowers fall outside the traditional lending spectrum.
MIC Investment 2025: Core Economic Indicators to Watch
For MIC managers, understanding and tracking key economic indicators is essential to anticipate shifts that impact portfolio performance. These indicators provide early signals about changes in interest rates, housing market conditions, borrower capacity, and broader economic momentum, enabling managers to adjust lending strategies, underwriting criteria, and portfolio composition to protect yields and manage risks effectively. Key indicators include:
BoC interest rate policy – While MIC lending rates are primarily shaped by private market factors such as borrower risk and competition, the Bank of Canada’s policy rate influences the broader interest rate environment. When the policy rate declines, fixed mortgage rates generally trend lower over time, driven by shifts in market expectations and bond yields. This creates downward pressure on the rates MICs can charge for new loans, particularly in competitive urban markets where lenders face more pricing pressure.
Shelter CPI – The Consumer Price Index (CPI) includes a shelter component that measures changes in rental costs and owner-equivalent rent (an estimate of what homeowners would pay if they rented their own homes), providing insight into housing-related inflation. While shelter CPI reflects trends in housing costs for consumers, it does not directly track home prices. However, declining shelter inflation in 2025 may suggest easing demand or softening conditions in the housing market, which can indirectly affect the value of real estate collateral backing MIC loans and influence recovery expectations in default scenarios.
Employment and wage data – Many MIC borrowers fall outside traditional lending criteria, often including self-employed individuals or those with non-standard income sources. Consequently, their ability to service loans is especially sensitive to labour market conditions. Strong employment growth and rising wages generally support timely mortgage repayments, while elevated unemployment or stagnant wage trends increase the risk of arrears and defaults, requiring careful portfolio monitoring and risk management.
Housing starts and building permits – These measures offer an early glimpse into future housing supply. An increase in new construction—especially in smaller or suburban markets—can signal rising inventory that may outpace demand. This potential oversupply can exert downward pressure on property values, which in turn may raise loan-to-value (LTV) ratios and reduce recovery prospects if borrowers default. However, these indicators also provide MIC managers with valuable insights to proactively adjust LTV thresholds to mitigate potential impacts.
New listings – The Canadian Real Estate Association’s (CREA) new listings data reveals the flow of residential properties entering the market, offering an early signal of supply shifts at a regional level. Rising new listings may indicate increasing supply that could weigh on home prices, affecting collateral values and regional risk exposure. MIC managers use these insights to strategically adjust geographic allocations and manage exposure to overheated or weakening markets.
Business confidence – The Bank of Canada’s Business Outlook Survey (BOS) measures Canadian firms’ hiring plans, investment intentions, and expected sales growth. These forward-looking indicators offer an early signal of economic momentum, enabling MIC managers to anticipate changes in labour demand and economic activity.
Purchasing Managers’ Index (PMI) – This monthly index measures business sentiment and activity in manufacturing and services. A sustained drop in PMI readings may signal slowing demand, weaker employment, and reduced consumer spending—trends that can impact borrowers’ ability to repay and affect housing markets.
GDP growth – As a broad measure of economic output, GDP growth signals the pace of business activity and labour market expansion. Sluggish or contracting GDP can point to weaker employment conditions and reduced income stability—factors that influence default risk and property market performance. MIC managers monitor GDP trends closely to anticipate macro-level headwinds and adjust exposure or pricing strategies accordingly.
Consumer Confidence – This sentiment-driven indicator reflects how optimistic households feel about their income prospects and financial stability. A sustained drop in consumer confidence can suppress housing demand and increase the likelihood of repayment issues, particularly among non-prime borrowers. MIC managers use this data to get an early read on potential changes in housing demand and repayment risk.
Bank of Canada Credit Conditions Survey – This quarterly survey of senior loan officers captures changes in lending standards and borrower demand in the traditional lending sector. When banks tighten credit, some borrowers may no longer qualify for conventional loans and instead turn to private lenders like MICs. While this can increase deal flow, it may also raise portfolio risk. To maintain portfolio quality, MIC managers may respond by tightening their own underwriting criteria or adjusting pricing to reflect higher risk.
Mitigating Risk Without Sacrificing Yield
Preserving capital while delivering consistent income is the core mandate of every leading MIC. One of the most effective safeguards is the monthly loss provision—a reserve specifically allocated to absorb potential loan losses without disrupting distributions.
To ensure this reserve is appropriately sized, independent auditors conduct annual stress tests, modeling a range of adverse economic conditions. These tests validate that the MIC can withstand losses without undermining yield—helping managers right-size the provision and avoid tying up excess capital unnecessarily.
Importantly, expected loan losses are already factored into the MIC’s target return. By regularly monitoring key economic indicators, such as employment trends, housing market conditions, and credit conditions, MIC managers actively adjust loan pricing, geographic exposure, and risk parameters to protect both capital and income. This disciplined management enables top-performing MICs to deliver steady, risk-adjusted returns even as market conditions change.
Conclusion
Macroeconomic conditions are constantly evolving, but well-managed MICs stay ahead by anticipating change, not just reacting to it. Through disciplined underwriting, rigorously tested cash reserves, and vigilant monitoring of key economic indicators, leading MIC managers safeguard investor capital and deliver consistent income—offering a resilient and strategic investment option in today’s dynamic rate environment.
CMI Financial Group is one of Canada’s fastest-growing non-bank financial services firms, offering three distinct MIC portfolios designed to meet a range of investor risk profiles and income goals.
To learn more about CMI MIC Funds and how they elevate your investment strategy, contact one of our investment professionals today for a free consultation and discover how MIC investing can help diversify your portfolio while delivering consistent, attractive income.
