Monday Market Minute | Jan 28, 2019

MIC sector opens 2019 with strong origination as banks tighten lending

What Moved

Multiple Canadian mortgage investment corporations reported robust origination pipelines entering 2019. Industry estimates suggested the non-bank lending market grew 10-15% in 2018, driven by B-20 displacement and tighter bank underwriting standards for self-employed and new-to-Canada borrowers. Romspen Mortgage Investment Fund and other large MICs maintained steady distributions, reinforcing investor confidence in the sector.

Why It Matters

For private markets allocators, MICs offered a compelling risk-return profile: first-mortgage security on Canadian real estate, yields in the 6-9% range, and low correlation to public equity volatility. The B-20 displacement was not a temporary blip but a structural reorientation of mortgage origination. Investors with exposure to well-managed MICs benefited from expanding deal flow without incremental credit risk.

Signal to Watch

The BoC's next rate decision on March 6 would determine whether the overnight rate remained at 1.75%. A hold would further entrench the conditions supporting MIC origination — stable borrowing costs paired with constrained bank supply.

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