While mortgage activity may be down this year, a flurry of deals behind the scenes suggests the industry is far from standing still.
The year kicked off with the merger of Fairstone Bank and Home Trust, bringing brands like Oaken Financial, Home Bank, Fairstone, EdenPark, and Fig together under one roof.
More recently, Nesto Group partnered with alternative mortgage provider Maple Financial via its CMLS subsidiary. Around the same time, Fisgard Asset Management was acquired by fellow B.C.-based alternative lender Neighbourhood Holdings.
Experts may not agree on one single reason behind the surge in M&A activity, but they point to several forces driving it. Most say there’s likely more to come, with real implications for brokers and borrowers.
Cost effective funding requires scale
One factor behind the recent wave of M&As is growing regulatory complexity, which some say has made it harder for smaller lenders to compete, particularly in a cooling but crowded mortgage market.
“I think it’s a sign of some macro trends,” says Neighbourhood Holdings CEO Taylor Little. “Two really big ones that stand out are that the regulatory environment in Canada, which makes it very hard to compete without scale, and second is that in a slower housing market, competition for deals is very fierce, so you need to be well capitalized to compete.”
Little explains that a decade ago, most lenders with capital could find a borrower. But with Canadians holding back on big purchases, only those with access to large pools of institutional capital can stay competitive.
Smaller lenders often rely on individual private investors to raise capital, while those with greater scale can access cheaper funding through the National Housing Act Residential Mortgage-Backed Security (RMBS) program.
Earlier this year, CMHC tightened the rules for its NHA RMBS program, making the popular funding tool more restrictive at the same time that housing prices pushed more borrowers into the alternative lending space.
“With the reduction in the CMHC NHA-RMBS issuance eligibility in the last few years, and with the more competitive house prices, we’ve seen a large increase in the alt space for mortgages,” explains Blake Dumelie, senior vice president of capital markets at Nesto.
He adds that big banks aren’t interested in using RMBS to back their mortgage products, as they can get better margins by funding mortgages with deposits and other internal sources. Alternative lenders with enough scale to tap into the RMBS market, on the other hand, can get a leg up on their competition by accessing these lower-cost funds.
“We expect there to be an advantage for anyone who’s in this space, if they can access RMBS,” Dumelie explains. “As you go from a mom-and-pop shop where you’re funding these riskier mortgages with other people’s money to institutional size and securitization, you need a lot more guardrails in place than before.”
Compliance as a growing cost of entry
Tapping into that institutional capital requires significant regulatory compliance, and operating in the alternative lending space in general comes with its own set of requirements — a combination that poses big challenges for smaller players.
“Doing business in Canada is getting more and more expensive; the regulatory environment is getting more and more difficult,” explains Rafer Strandlund, CEO of recently acquired Fisgard.
He explains that prior to the recent acquisition, Fisgard lent money in five provinces, and each year every one of its underwriters had to have their licence renewed for each province, with some requiring annual training.
“Compliance is becoming a full-time department in any company, so if you’re small, affording a competent compliance department becomes much more difficult,” Strandlund explains. “If you’re small, you’re going to struggle, and at some point you’re going to either look for a partner to grow or find a way to wind down.”
When Strandlund and his sister, Hali Noble, considered their options after the 2023 passing of their father and Fisgard founder, Wayne Strandlund, he says an acquisition felt like the best way to secure the company’s future in a more competitive environment.
“When we looked at our options, we said ‘well, if this is going to happen in the industry, wouldn’t it be better to be early out the gate with a quality partner, rather than watching great companies come together, and then finding ourselves on the outside looking in?’”
If everyone else is doing it…
Strandlund’s perspective reflects a sense of necessity that appears to be fuelling the momentum behind the M&A trend. While it may not have sparked the initial wave, once consolidation started, each deal seemed to add more fuel to the fire.
Daniel Webster, president of Maple Financial, believes it was his organization’s recent partnership with Nesto Group through its CMLS subsidiary that helped accelerate the trend, partly due to the industry profile of his father, John Webster, the former head of Scotia Mortgage Authority.
“John gets an outsized amount of attention, and my view is that they see us and they’re all thinking about how they’re going to fight that competition off, because we’ve been so quick to scale up over the past five months,” he told Canadian Mortgage Trends, suggesting other players in the alternative lending space wouldn’t be able to match that scale without consolidating.
“We have a unique product shelf that is now being emulated around the industry, and we’re very flattered by that — because what that tells me is that we’re the market leader — so I look forward to more copycats,” he added.
Part of what makes the Maple and CMLS partnership so intimidating to competitors, according to CMLS Senior Vice President of Residential, Andrew Gilmour, is that it gives the combined lender national reach, widening the field of competitors in every market.
“A lot of these institutions have been hyper regional and they’re just never going to scale [organically],” he says. “None of these institutions have the ability to scale, to bring products to the market, they’re entirely reliant on a small funding base. And that naturally restricts what they’re able to do.”
What it all means for brokers
Those making deals often point to the potential for new products and services to emerge from consolidation, but Ryan Sims of TMG has his doubts.
“Very seldom has less competition meant good things for the broker and/or the borrowers,” he says. “That’s always my concern; when you have less choice and less players, supply and demand dictates that prices generally go up.”
Sims, for one, expects some of the less profitable product lines to disappear, particularly among what he calls “at-the-margin lenders” who may be less willing to offer loans on rural properties.
“I hope it leads to more choice, more products, a deeper bench and a deeper product offering, but I’m skeptical,” he says.
At the same time, Sims believes there the consolidation wave has not yet crested, and that we may see more blockbuster deals in the coming months.
“It’s forced competition, because if you don’t get bigger, and you don’t become more efficient, you’re probably not going to be as competitive in the next couple of years,” he says. “I still think there’s probably a couple of deals that come out of the woodwork in the next six months where unlikely bedfellows team up.”
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Last modified: November 20, 2025