While June to August is often considered the “summer doldrums” in traditional financial markets, the same cannot be said for real estate—and by extension, the whole loan mortgage market. Seasonally, summer marks the peak for home resale transactions and mortgage refinancing in Canada, driven by favourable weather, school breaks and buyer urgency to settle before fall.
For individual mortgage investors, particularly those targeting short-duration pools for consistent cash flow, this seasonal surge translates into higher prepayment rates and portfolio churn, which can disrupt income predictability and create reinvestment risk.
Historically, summer is a time when mortgage yields compress slightly due to faster principal return, even as credit performance tends to remain stable due to strong employment and borrower liquidity. Understanding how 2025 compares and what’s shifting is essential for tactical positioning in the third quarter and beyond.
Mid-Year Market Check-In
The Canadian whole-loan mortgage market is navigating a complex but potentially rewarding environment midway through 2025. For private mortgage investors focused on income stability and credit quality, three dynamics stand out: a paused but still elevated rate environment, moderating home prices and uneven deal flow.
The Bank of Canada (BoC) has held its overnight rate at 2.75% since April, maintaining a cautious posture even as inflation moderates. Markets are not pricing in a rate cut before September, reflecting policymakers’ hesitancy to continue easing monetary policy after an aggressive rate-cutting cycle over the past year. Since June 2024, the BoC has lowered interest rates by a total 225 basis points, bringing the overnight rate from the post-pandemic high of 5.00% to the current 2.75% level.
From a private mortgage investing perspective, this offers a unique window to lock in elevated yields on short-term loan originations before the rate cycle shifts. Pricing remains attractive, particularly for loans underwritten in the private and Alt-A segments, where risk-adjusted returns continue to exceed historical norms.
This is especially important considering that the national housing outlook has softened, with a recent Reuters poll projecting a 2% average home price decline in 2025. Toronto is expected to see a steeper drop of 4%, driven by elevated condo supply, investor fatigue and affordability constraints.
However, this outlook is not uniform across regions. Performance in Alberta (particularly Calgary and Edmonton), Halifax, and Montreal has remained more stable, supported by population growth, tighter supply and more moderate price hikes in prior years.
Importantly, whole-loan private mortgage investors benefit from the resilience of short-duration, conservatively structured loans. Exposure to long-term collateral risk is mitigated by low loan-to-value (LTV) ratios, prudent underwriting and frequent borrower touchpoints- key strengths of private lending.
While resale activity has picked up seasonally, supply constraints remain uneven. CMHC reports housing starts were essentially flat in May at approximately 280,000 units. In June, Canada saw a slight 0.4% increase in the seasonally adjusted annual rate of housing starts, reaching 283,734 units. The six-month trend also rose 3.6% to 253,081 units. Despite this modest national uptick, regional disparities persist—particularly in the GTA, where a significant overhang in condo inventory continues to weigh on new project momentum.
Despite this slowdown in certain segments, borrower demand remains strong in areas less exposed to oversupply, especially single-family homes, multi-generational housing and lower-tier properties in high-immigration cities like Calgary, Halifax and Ottawa.
Deal flow in the whole-loan space has become more selective but higher quality, with investors competing for well-priced, cleanly underwritten pools as lenders tighten criteria and borrowers seek certainty in closing.
Three Tactical Moves to Protect and Enhance Return in Q3
As the Canadian whole-loan mortgage market navigates a shifting mid-year landscape, savvy investors are presented with a unique set of opportunities. With rate policy poised to pivot, regional price divergence growing and summer churn in full swing, tactical allocation has become more critical.
Here are three actionable strategies to help you protect yield, position ahead of market shifts, and capitalize on evolving credit dynamics—all backed by CMI’s specialized lending platform and national reach.
Tactical Play #1: Capture Yield Before the Cycle Turns
With the BoC holding rates steady since April and no further rate cuts expected before Q4, investors are in a unique window to capture elevated yields before the next phase of the monetary cycle.
Those sitting in cash or in longer-duration fixed income may miss the current income premium available in short-term private mortgage lending. Investors in this position may want to consider investing in high-yield, short-duration whole loans that offer attractive returns.
CMI’s interest-only mortgages, with an average 12-month term, are built for this moment—providing steady monthly income with minimal duration risk and strong credit quality, making them an ideal vehicle for yield capture in a holding-pattern rate environment.
Tactical Play #2: Tilt Toward Undervalued Regions
While national home prices are forecast to decline by 2% this year, with Toronto expected to see a sharper 4% drop, not all markets are following the same path. Regional divergence is growing, and smart capital is flowing into areas with stronger fundamentals. Markets like Alberta, Halifax and Montreal are showing resilience, supported by better affordability, healthy sales activity and population growth.
For private mortgage investors, reallocating exposure away from overheated regions or supply-heavy segments – such as certain parts of the condo market – and toward these more stable markets offers a way to safeguard collateral value and diversify risk.
CMI’s coast-to-coast origination platform enables targeted investment in these undervalued geographies, where well-structured loans can continue to deliver consistent income and principal protection.
Tactical Play #3: Take Advantage of Summer Churn
Summer remains the busiest season for home sales and refinancing, leading to increased mortgage prepayments and portfolio turnover. While this can present a challenge for longer-duration or illiquid investments, it opens the door for short-term strategies to benefit from reinvestment at elevated yields.
Rather than viewing prepayments as a drag on returns, private mortgage investors can use the seasonal churn to refresh and reprice portfolios, keeping yield levels elevated even as the broader rate environment begins to shift.
CMI’s active, full-service management approach ensures investors are well-positioned to capitalize on this churn, with timely capital redeployment that maintains income continuity and portfolio velocity through the second half of the year.
Conclusion
In a market shaped by shifting rates, regional volatility and evolving borrower behaviour, the remainder of 2025 demands agility. By taking action now—locking in yield, diversifying geographically and reinvesting prepayments efficiently—investors can preserve income, mitigate risk and stay ahead of the curve.
With deep market expertise, active portfolio management and access to quality origination across Canada, CMI Financial Group is your partner in executing these mid-year tactical plays with confidence.
CMI has been guiding whole-loan mortgage investors through shifting rate cycles for over a decade. With more than $3 billion in successful mortgage placements, CMI is one of Canada’s leading private mortgage investment providers.
To learn more about our tactical whole-loan mortgage solutions, schedule a complementary consultation with one of our investment managers.
