Mortgage Investment Corporations (MICs) have emerged as one of Canada’s fastest-growing alternative asset classes, increasingly embraced by investors seeking competitive returns and portfolio diversification amid economic uncertainty.
While MIC investments have long been valued for their ability to generate steady income across market cycles, they have taken on renewed appeal in today’s falling interest rate environment. Structured around disciplined lending practices—including strict loan-to-value (LTV) limits, diversification across property types and lien priority and geographic allocation—MICs offer investors a way to earn predictable yields while managing downside risk.
Interest rates remain a focal point in Canada’s economic outlook. Since mid-2024, the Bank of Canada (BoC) has lowered its policy rate eight times, a cumulative reduction of 250 basis points — from 5.0% to 2.5% — as slowing economic growth, cooling inflation and softening labour market conditions prompted policymakers to begin easing monetary policy after two years of aggressive tightening.
In September, the BoC lowered its overnight rate from 2.75% to 2.50%, marking its first cut since March. This reduction brought the prime lending rate down to 4.70%, providing relief for variable-rate mortgage borrowers and indirectly affecting fixed mortgage rates through movements in the bond market
Although fixed-rate MICs, such as the CMI MIC Balanced Mortgage Fund, are not directly tied to BoC decisions, their lending rates are guided by market forces such as borrower demand, perceived risk and the supply of private capital. Another key distinction between MICs and traditional lenders is the term of the average mortgage. MICs consist of privately originated loans with relatively short terms—typically around 12 months—that can be renewed or repriced regularly. As a result, MICs behave differently from investment vehicles composed of institutional mortgages, such as Mortgage-Backed Securities (MBS), which are more sensitive to interest rate fluctuations.
Because of this market-driven structure and short-term flexibility, MICs offer more predictable returns, even as borrowing costs in the broader economy change. This has made them an appealing income option for investors navigating the shift from a high-rate to a lower-rate environment.
Housing Market Outlook
The performance of residential MICs is closely tied to housing market trends, and Canada’s market has clearly cooled from its earlier highs, particularly in Toronto and Vancouver. RBC Economics now projects national home resales to fall 3.5% in 2025, to roughly 467,100 units, with most of the decline concentrated in Ontario and British Columbia.
That said, regional divergence is emerging. In parts of the Prairies, Quebec and Atlantic Canada, supply is tighter and demand more balanced, which is helping stabilize values. Meanwhile, in Ontario and B.C., abundant inventory and weak buyer urgency are exerting downward pressure.
Though lower rates were expected to spark renewed buying, conditions have underwhelmed so far. RBC notes that easing policy has yet to meaningfully shift the market’s momentum, with the weaker-than-anticipated backdrop reflecting ongoing affordability challenges and cautious buyer sentiment.
In this environment, MIC investments that tend to perform best follow disciplined, dynamic lending practices, including diversification across geographies and property types, strict loan-to-value (LTV) caps and careful underwriting. Leading MICs adjust their criteria based on evolving market conditions, ensuring borrowers receive manageable, well-structured loans backed by viable exit strategies. For example, they may tailor LTV ratios to specific markets, set maximums based on local conditions, and shorten appraisal timelines to capture the most accurate and up-to-date property values.
Borrower Flow and Credit Picture
One of the core advantages of residential MICs is how they’re structurally aligned with refinancing and renewal activity rather than home purchases, which gives them a natural edge in current market conditions.
Because purchases represent only a negligible share of MIC lending, these vehicles benefit when renewal or refinancing activity increases in the broader mortgage market. Additionally, MICs have the flexibility to tailor loan terms to a borrower’s income and repayment capacity, offering features such as more flexible amortization schedules or supportive repayment provisions, such as interest-only payments and prepaid terms.
At renewal, most MICs conduct “comfort checks” on borrowers, which involve assessing repayment history as well as income, expenses and payment capacity to ensure continued affordability. Evaluations may also include conducting property assessments, ensuring property taxes are fully paid and confirming insurance is in place. This information is then used to determine any renewal offers and the associated rate and fees. This proactive approach helps minimize surprises and supports loan performance as broader economic conditions shift.
Prepayment behaviour in the private mortgage space also tends to differ from that seen in traditional lending. Early repayments are relatively uncommon, reflecting the short term nature of private mortgages, typical borrower profile, and the prepayment penalties built into most MIC contracts. When loans are repaid early, capital is typically redeployed quickly into new mortgages, keeping investor funds actively invested while any collected penalties can provide a buffer —or even a modest lift —to returns.
On the credit side, mortgages remain among the most stable forms of consumer credit. According to Equifax’s Q1 2025 Canadian Consumer Trends report, delinquency rates on non-mortgage credit, such as credit cards and auto loans, rose 8.9% year over year, whereas mortgage delinquency rates increased more modestly. Defaults currently sit at just 0.2%, providing further perspective on the low level of total risk exposure. Canadian borrowers have consistently maintained low mortgage arrears even during challenging periods, such as the Global Financial Crisis and the COVID-19 pandemic. This divergence underscores that mortgage borrowers, broadly, remain more resilient even as debt stress ratchets up elsewhere.
For MIC investments, a disciplined approach to borrower selection and rigorous servicing practices are essential for managing downside risk. Managers typically target maximum LTV ratios in the 60% to 75% range, providing a healthy equity buffer in the event of declining property values.
MIC portfolios can be structured along a spectrum of risk and return. Portfolios weighted toward first-position mortgages, which have priority repayment rights, carry lower risk but also offer more modest yields. Introducing second-position loans can enhance yield, reflecting a modest step-up in risk. Others, such as the CMI Balanced Mortgage Fund, invest in a mix of first- and second-position residential mortgages, balancing income potential with prudent risk management.
CMI’s Growing Footprint and Fund Strategies
CMI Financial Group has established itself as one of Canada’s largest and fastest-growing non-bank mortgage lenders, funding over $3 billion in mortgage originations across its integrated platform. This growth is reflected in its suite of MIC investment funds, each designed to align with different risk-return profiles.
The Prime Mortgage Fund, targeting an annual yield of 6%-8%, is CMI’s most conservative offering. It focuses exclusively on first-position residential mortgages and aims for an average maximum 65% LTV cap.
CMI’s Balanced Mortgage Fund invests in both first and second mortgages, with a target weighted portfolio LTV limit of 75%. It targets an annual yield of 8%-9%.
CMI’s High-Yield Opportunity Mortgage Fund is its most aggressive, targeting an annual yield of 10%-11%. It invests primarily in second mortgages to generate higher income while maintaining disciplined diversification and credit oversight.
By differentiating its funds by lien priority, loan-to-value, borrower Beacon score, property type and geographic location, CMI offers a spectrum of risk-return exposure. Across all funds, rigorous underwriting, portfolio diversification and active risk management are employed to help preserve capital, even in softer housing markets.
For a deeper look at CMI’s performance and strategies, download the latest Fund Report and Fact Sheet. To learn how MIC investments could fit into your diversified portfolio, connect with CMI for a complementary consultation with one of our experts.
