The Quiet Rise of Private Lending in Canada: What Every Investor Should Know

A Shift Beneath the Surface

While headlines continue to spotlight the ups and downs of public markets, a quieter transformation has been reshaping the investment landscape in Canada. Private lending—once a niche corner reserved for institutions and insiders—is emerging as a growing force in the portfolios of Canadian investors.

From seasoned wealth managers to dentists and business owners, more investors are exploring alternative strategies like Mortgage Investment Corporations (MICs) as a response to public market volatility, inflation uncertainty, and the desire for stable, predictable income.

Understanding Private Lending

Private lending refers to loans made outside of traditional financial institutions like banks. In the Canadian real estate market, this typically involves short-term residential or commercial mortgages funded by private individuals or firms.

Unlike banks, private lenders can move faster and underwrite loans that don’t meet rigid institutional criteria. Borrowers may include self-employed professionals, those needing bridge financing, or homeowners seeking short-term solutions during refinancing delays.

Why Is Private Lending on the Rise?

There are several reasons why private lending is experiencing a sharp uptick:

1. Bank Tightening: In response to regulatory changes and rising rates, banks have become more conservative. Many qualified borrowers are being declined or delayed, creating a funding gap that private lenders can fill.
2. Real Estate Market Resilience: Despite macroeconomic noise, Canadian
   housing—especially in urban centers like the GTA—remains in high demand. Investors see real estate-backed lending as a safer alternative to volatile equities.
3. Attractive Returns: Many private mortgage funds, such as MICs, target yields in the 8–10% range. That’s 2–3x the return of a 1-year GIC in 2025, which averages around 3.7%.*
4. Diversification Benefits: Private lending has low correlation with public markets. That means it can act as a stabilizer in a well-rounded portfolio.

Case in Point: MICs in Canada

A MIC (Mortgage Investment Corporation) is a pooled investment vehicle that lends to borrowers through secured mortgages. It’s structured under Section 130.1 of the Canadian Income Tax Act and must distribute 100% of its net income to investors.

At Morex, our MIC Fund focuses on owner-occupied homes in the GTA and Golden Horseshoe. With an average loan-to-value ratio of 67% and conservative short-term underwriting, the fund seeks to preserve capital while delivering quarterly income.

How Big Is the Private Lending Market?

While the exact size is difficult to measure due to its decentralized nature, estimates from industry sources suggest that over $15 billion in private mortgage financing takes place in Canada annually.*

In Ontario alone, FSRA data showed that nearly 10% of all new mortgages in 2023 were funded by private lenders.* This marks a noticeable rise from just 4% a decade ago.

Risks and Considerations

Private lending is not risk-free. Investors should be aware of:

• Liquidity Restrictions: Unlike public equities or ETFs, MIC investments often have holding periods or limited redemption windows.
• Capital at Risk: Although mortgages are secured, defaults can happen. That’s why experienced underwriting and conservative LTV ratios matter.
• Accreditation Requirements: Many MICs, including Morex, are offered to eligible or accredited investors under Canadian securities law.

The Bottom Line: A Space Worth Understanding

Private lending in Canada is no longer a footnote in the investment conversation—it’s a strategic choice for investors seeking income, stability, and asset-backed diversification.

As inflation, interest rates, and global uncertainty continue to challenge traditional portfolio construction, the case for allocating a portion of capital to alternative lending has never been stronger.

That doesn’t mean replacing your advisor or betting the farm—it means adding a layer of resilience. A layer that, quietly, is changing the Canadian investment landscape.

Disclaimer

This article is for informational and educational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy securities, including shares of the Morex MIC Fund. Any investment decision should be made only after reviewing the offering memorandum and consulting with a licensed financial advisor.

The Morex MIC Fund is available only to eligible or accredited investors under applicable Canadian securities laws.

Mortgage investing involves risks, including the potential loss of capital, limited liquidity, and may not be suitable for all investors. Investments in a MIC are not guaranteed or insured.

*Sources:

• FSRA Ontario, Private Lending Trends 2023
• Bank of Canada GIC Rate Summary (April 2025)
• Canadian Mortgage Professionals Association (CMPA)