Growing economic uncertainty stemming from factors like trade tensions, tariff concerns, interest rate changes, and evolving lending criteria is fuelling uncertainty in the Canadian real estate market and reshaping the mortgage landscape.
In response to U.S. tariffs and a “turbulent economic landscape”, the Bank of Montreal (BMO) has tightened its mortgage lending rules for self-employed Canadians in “high-risk” industries. As of March 19, self-employed Canadians working in steel and aluminum, construction, transportation, leisure and entertainment, retail sales, banking and financing, manufacturing, farming and natural resources, and wholesale trade and utilities will find it more challenging – and more expensive – to borrow money.
Specifically, BMO has lowered the total debt service (TDS) ratio to 42% of income (from 44%) for these borrowers, capped the gross debt service (GDS) ratio to 39%, and now requires at least one applicant to have a minimum credit score of 750. This means borrowers will have to show that all obligations, such as credit card payments and personal loans (TDS), as well as mortgage payments, property tax, maintenance fees (GDS), fall within these limits when compared to their total income.
While this change doesn’t affect most borrowers, it’s a signal that banks and other traditional lenders are becoming increasingly cautious in this period of market volatility. For mortgage brokers, these shifts, along with broader Canadian real estate trends, present both challenges and opportunities. More stringent lending criteria could make it more challenging to secure timely and appropriate financing, particularly for clients with unique financial situations.
In this environment, strengthening relationships with lending partners, including alternative and private mortgage lenders, will be more important than ever. These lenders can help fill the gaps left by tightening bank lending policies, enabling you to deliver strategic, flexible, and proactive financing solutions to borrowers.
Understanding the current market
The on-again, off-again US tariffs have increased uncertainty and shaken confidence in Canada’s economy. The Bank of Canada (BoC) held its policy rate steady at 2.75% on April 16, following nine cuts since last June, citing diminished economic growth prospects and rising inflation expectations. The central bank noted that “pervasive uncertainty makes it unusually challenging to project GDP growth and inflation in Canada and globally.”
The BoC reported that uncertainty caused by trade tensions has dampened consumer and business confidence, contributing to weakened consumption, residential investment, and business spending in the first quarter of 2025. That being said, many economists still expect rates will continue to come down. TD Economics, for example, is forecasting that the BoC’s lending rate will come down to 2.0% by the end of the year.
With lower interest rates on the horizon, this could spur new activity and help reinvigorate the Canadian housing market forecast – and ultimately boost overall economic activity. Hopeful buyers will be looking for guidance to navigate the mortgage market amid these evolving conditions.
Private lending as a strategic tool
Historically, private lending was often perceived by both mortgage brokers and borrowers as a last resort, typically associated with financial hardship. However, in the wake of major financial crises – including the COVID-19 pandemic and the Great Recession – tightened regulations and stricter qualifying criteria from banks and other traditional lenders have led more borrowers to understand the value of private mortgage solutions. At the same time, transparent, ethical, and experienced private mortgage lenders, such as CMI, have helped reshape the reputation of the sector. As we enter another period of economic uncertainty, demand for private lending will continue to grow.
In a shifting economic environment, private mortgage lending offers more than just an alternative to traditional financing – it provides a flexible, tailored, and strategic solution for borrowers who don’t fit the conventional mold. For mortgage brokers, private lending also unlocks new ways to serve clients and secure approvals that would otherwise be out of reach.
At CMI, we view private lending as a collaborative and adaptive tool—one that evolves with the market and with the unique needs of each borrower. When used strategically, it offers a wide range of benefits that can help mortgage brokers close more deals and deliver meaningful solutions for clients.
Here are some of the key advantages that make private lending such a powerful option in today’s environment:
Flexibility beyond the limits of traditional lending
Traditional lenders often apply a binary approach. Borrowers either qualify or they don’t, based on rigid criteria like income type, employment history, credit score, debt ratios, and property characteristics. If one detail doesn’t fit the box, the entire application can be declined.
Private lending exists on a spectrum. We’re not limited by cookie-cutter policies – we evaluate each borrower and property on its own merits, using common sense and big-picture thinking. That means we can offer solutions when the need or situation is unconventional.
For example, if a borrower needs access to a higher loan-to-value (LTV) ratio than a traditional lender will allow, we may be able to structure a first and second mortgage bundle to maximize equity access while maintaining manageable repayment terms. Or, if borrowers are turned away based on TDS/GDS ratios, we can look at other factors to structure a more flexible financing solution for a specific client. It’s the story behind the numbers that matters most.
At CMI, we review each application carefully on a case-by-case basis, aiming to match every borrower with a solution that fits their unique needs, including a clear plan for how they’ll repay the loan or move to a longer-term option.
Speed and efficiency in a shifting market
Time is often a critical factor in real estate deals or debt restructuring. Traditional lenders can take up to two weeks or more to turn around a deal, which isn’t always realistic in urgent situations. Private lenders like CMI move faster, often issuing approvals within hours.
For example, a short-term second mortgage could be arranged quickly to help a borrower bring a first mortgage up-to-date, stopping foreclosure proceedings and buying time to stabilize their finances.
With interest rates expected to slide further before the end of this year, private lending can also act as a bridge for borrowers who aren’t ready to commit to another long-term fixed rate mortgage. Private mortgages typically range from six months to three years, and it’s possible to negotiate custom term lengths, even as brief as a few days, if needed.
A bridge back to a conventional solution
With a private mortgage lender, every underwriting decision starts with one core question: What is the borrower’s path forward? We always lend with the borrower’s exit strategy in mind.
Our goal is to help meet a client’s immediate needs while supporting their transition toward greater financial stability, whether that means repairing credit, catching up on obligations, or preparing them to requalify for a traditional mortgage down the road.
For example, a borrower emerging from a consumer proposal may not yet qualify with a prime lender. With a private mortgage, they can access funds to consolidate high-interest debts and start rebuilding their credit profile, laying the groundwork to transition back to the traditional lending space once their financial situation has improved.
A lifeline for self-employed and non-traditional borrowers
Self-employed borrowers, especially those in industries potentially impacted by U.S. tariffs, often face unique financial challenges that traditional lenders may not accommodate. Private mortgage lenders can offer valuable solutions, such as a second mortgage to help with cash flow or to consolidate debt.
For example, a self-employed borrower with irregular income and a low credit score might be declined by a bank. However, by considering the full context of their business performance and financial goals, a private lender can craft a customized mortgage solution tailored to their actual capacity, which might include flexible options like interest-only payments or a prepaid mortgage designed to ease cash flow pressures.
Additionally, private lenders support borrowers with non-traditional income sources or temporary setbacks, like a recent layoff, who remain fundamentally creditworthy but may not fit the strict criteria of traditional lenders.
Choosing the right private lending partner matters
With economic uncertainty ahead, the strength and transparency of your lending partners is more important than ever. Some smaller or less established private lenders may not have the infrastructure or risk controls in place to adapt and withstand the challenging conditions.
Not all private lenders are created equal, which is why it’s critical to do your due diligence when selecting a lending partner. Look for a lender that prioritizes transparency, particularly around fees and terms, and has a proven track record of success in various market conditions. Reputation is crucial: look for a history of ethical lending practices, strong broker relationships, and responsible underwriting.
Find the opportunities
As the market continues to evolve, having a full range of financing tools at your disposal will be essential. Private lending stands out as a valuable solution for addressing the diverse and often complex needs of today’s borrowers. Explore how incorporating private mortgage options can enhance your offerings and help you deliver the flexible, tailored solutions your clients need. Partner with CMI to navigate any market with confidence.
