Ontario’s mortgage regulator says the private market is far from a secondary issue.
Ontario’s Financial Services Regulatory Authority (FSRA) warned in its 2025-26 regulatory plan that surging borrower vulnerabilities, weak apartment pre-sales and growing uncertainty related to tariffs could quickly reignite demand for private mortgages, even after a retreat over the past year.
To combat this risk, regulators said they would expand oversight of private brokerage and mortgage administration and expect brokerage firms to demonstrate stronger oversight, disclosures and documented exit strategies to clients.
“Now more than ever, it is important for mortgage professionals to put consumer protection at the forefront of everything they do,” the FSRA wrote. “We are closely monitoring the situation and making adjustments as needed.”
The warning comes as delinquency rates continue to trend upward throughout the year, with a significant increase in delinquency rates in Ontario. Toronto’s mortgage delinquency rate reached 0.24% in the first quarter, and the province’s 90-day or more delinquency rate climbed to 0.27% in the second quarter, an increase of 11 basis points year-on-year. Non-mortgage delinquency rates are also rising, the FSRA noted, which is a concern because they are often a leading indicator of future mortgage payment difficulties.
Meanwhile, apartment investors are facing growing pressure, with the FSRA citing CMHC estimates that some who sell prefabricated apartments at top prices in 2024 could face capital losses of around 6%. With pre-sales in the Greater Toronto Area down about 75 per cent since 2022 and holding costs outstripping rental growth, investor woes have become a growing concern.
Why FSRA expands regulatory scope
The FSRA said private lending remains an important financing option for borrowers who no longer qualify from traditional lenders, but argued the current environment made the industry more vulnerable to consumers and investors.
Its 2024 “APR Blitz” focused on disclosure practices in private transactions and found that only 35.5% of documents reviewed had APRs calculated correctly.
Other flagged questions include:
- Omit required fees: 28.6% of documents exclude fees that should be included in the APR calculation, resulting in an underestimation of borrowing costs.
- Short-term mortgage APRs are too high: Of the 82 documents with maturities of six months or less, 42 (or 51%) had annual interest rates above 35%. Although these mortgages were entered into before the federal criminal rate changes on January 1, 2025, the FSRA used this inspection to alert brokers to the new thresholds.
- Unlabeled estimate: 24.4% of documents contain estimated charges that are not clearly identified as estimates.
- Fee inclusion is incorrect: In 32.4% of documents, the annual interest rate calculation included expenses that should have been excluded (such as the borrower’s attorney fees), resulting in the annual interest rate being overestimated.
Regulators have also stepped up scrutiny of mortgage administrator filings. Of the 266 licensed managers, 12 were classified as high risk, with several flagged for trust account deficiencies, commingling of funds and early payment of investor payments before receiving payments from borrowers.
Those with the worst problems now face remediation requirements or stepped-up inspections.
What brokers and managers should expect
Looking ahead to 2025-26, the FSRA said it will take a proactive regulatory approach, particularly in areas where consumer vulnerabilities and investor risks are most likely to intersect. Its priority areas include:
- Continued review of private mortgage suitability, disclosures and exit strategies
- Undertake a deeper review of conflict of interest situations, particularly where brokerage firms and managers are linked
- Expands regulation of large and mid-sized brokerage firms with more than 100 agents
- Re-examination of prime brokers’ resources and compliance capabilities
The regulator noted that its consumer research found that trust in the industry had increased since 2022, while the number of consumers identified as vulnerable had also increased. This proportion has increased from 22% to 39%.
As the FSRA writes, “Now more than ever, it is important for mortgage professionals to put consumer protection at the forefront of everything they do.”
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Last modified: November 24, 2025
