Private Mortgages in Ontario's Recovery: Rate Cuts, Renewal Shock, and Bridge Lending (2024-2025)

For two years, Ontario mortgage borrowers waited for rate relief. In June 2024, it finally arrived. The Bank of Canada began cutting from its 5.00% peak, and by December 2025, the overnight rate sits at 2.25%, a full 275 basis points lower. But the recovery has been more complicated than "rates went down, everything got better." The renewal wave that economists warned about in 2023 has landed, and the fallout is still working its way through the system.21

This is what 2024 and 2025 looked like for private mortgage lending in Ontario, and why the demand picture is more nuanced than the rate headlines suggest.

The Rate Cuts Finally Arrived

The Bank of Canada's easing cycle began on June 5, 2024, with a 25-basis-point cut to 4.75%. What followed was a steady drumbeat of reductions through the rest of 2024 and into 2025:63412

Overnight rate decisions per Bank of Canada announcements; prime rate is approximate (overnight rate plus roughly 2.20 percentage points, the convention most Canadian banks have followed in this period). OAC. Rates subject to change. Conditions apply.

Variable rates have tracked the cuts directly. A borrower on prime minus 0.85% is now paying approximately 3.60%, down from over 6% at the peak. Fixed rates have come down more gradually, influenced by bond yields that have been less cooperative than the overnight rate.

For many borrowers, the relief is real. But for those who locked into ultra-low pandemic-era rates and are now renewing, today's fixed rates, while well off their 2023 peak, still represent a significant payment increase for most households.

Renewal Shock: A Wave of Mortgages Comes Due

The scale of the renewal wave is large. In a November 2024 speech, the Bank of Canada's Senior Deputy Governor noted that more than 4 million mortgages, about 60 percent of all outstanding mortgages, would renew over the following two years, many of them still carrying the ultra-low rates set during the pandemic.7

Consider a hypothetical borrower, call her Linda,* who locked in a 5-year fixed rate of 1.89% in 2020 on a $425,000 mortgage with a 25-year amortization. Her monthly payment at origination was about $1,779. At renewal in 2025, even at a competitive 4.19% fixed rate on the roughly $355,000 balance remaining, with 20 years left on the amortization, the new payment works out to about $2,190, an increase of roughly $411 a month, or close to $4,900 a year. The mortgage balance is lower after five years of payments, but the rate increase more than offsets that reduction. * Real names have been replaced with fictional names. This case is illustrative.

For most households, this increase is uncomfortable but manageable. The stress test, for all the criticism it received, did ensure that borrowers could theoretically handle higher rates when they qualified. The problem is that many households have taken on additional debt since 2020 -- car loans, lines of credit, credit card balances -- and the combined payment shock across all obligations is steeper than the mortgage alone.5

New Rules That Changed the Game

Two different bodies introduced significant mortgage changes in 2024 that directly affected the private lending market: the federal Department of Finance, and Canada's banking regulator, the Office of the Superintendent of Financial Institutions (OSFI):

• Stress test exemption for switches. Effective November 21, 2024, OSFI no longer requires federally regulated lenders to apply the mortgage stress test to a straight switch of an existing uninsured mortgage to a new lender at renewal, provided the loan amount and remaining amortization do not increase.9 This freed many borrowers who could afford their current payment, but could not pass the stress test at a new lender, to shop for a better renewal rate.
• 30-year amortizations for first-time buyers and new construction. Effective December 15, 2024, insured mortgages for first-time buyers and purchasers of newly built homes became eligible for 30-year amortizations, which lowers the monthly payment compared with a 25-year term.10
• $1.5 million insured cap. Effective the same date, the insured mortgage purchase price ceiling rose from $1 million to $1.5 million, with a minimum down payment of 5% on the first $500,000 and 10% on the remainder, expanding access to insured rates in Ontario's expensive markets.10

These changes collectively eased the pressure that had been pushing borrowers toward private lending. The stress test exemption for switches, in particular, meant that a borrower who could afford their current payment but could not qualify at the stress test rate now had the freedom to shop for a competitive renewal rate among federally regulated lenders on a straight switch. Before this change, those borrowers were effectively captive to their existing bank.

How Private Lending Adapted

Despite falling rates and loosened rules, private mortgage demand in Ontario has not declined. It has shifted.

The trigger rate rescues and panic refinancing that dominated 2022-2023 have largely subsided. In their place, three categories of demand have grown:

• Bridge-to-renewal lending. Borrowers who need 6 to 12 months of private financing to improve their credit, complete an income documentation cycle, or wait for a property value recovery before qualifying with a conventional lender.
• Separation and buyout financing. With property values stabilizing, separating couples need financing to buy out a departing partner. When one partner's income alone does not qualify at banks, a private mortgage bridges the gap.
• Construction and renovation lending. As rates fall and homeowners invest in renovations rather than moving, private lenders have become active in short-term construction financing where banks are slow or inflexible.

Private mortgage rates have edged down slightly from their 2023 levels, though published rate ranges vary by lender, loan-to-value and property type and are not tracked by a single public source. The reduction has been modest, but private lenders have recognized that in a lower-rate environment, the spread needs to remain reasonable for borrowers to see the value in short-term private financing.

The GTA Condo Problem

One corner of the Ontario market where private lending has become particularly relevant is the Greater Toronto Area condo sector. According to the Toronto Regional Real Estate Board's December 2025 Market Watch, GTA condo apartment sales totalled 1,029 units that month at an average price of $628,029, and the board reported elevated listing inventory and lower selling prices across the GTA market in 2025.11 Some pre-construction investors who purchased at 2022 valuations may find that their units appraise below what they paid.

This creates a specific problem for private mortgage borrowers with condo properties. If a borrower took a private first mortgage at 75% LTV based on a 2022 appraisal, and the property's value has declined 10% to 15%, the current LTV may exceed 80%. At renewal, the private lender may not renew at the same amount, and conventional lenders will not touch the higher LTV. The borrower is caught between declining collateral value and a lender who needs a principal reduction to renew.

This kind of situation has become increasingly common. Consider Daniel,* a condo investor in North York who purchased a pre-construction unit in 2022 for $680,000 and financed closing with a private first mortgage of $510,000 (75% LTV). He now faces a current appraisal of $590,000. The existing mortgage represents 86% LTV against the current value. The private lender wants a $67,000 principal reduction to renew. Without it, the borrower faces either finding a new private lender at higher cost or selling into a soft market. * Real names have been replaced with fictional names. This case is illustrative.

Looking Ahead to 2026

The Bank of Canada held at 2.25% in December 2025, after its October cut, and the direction from here is uncertain. Canada's economy contracted 1.6% in the second quarter of 2025, reflecting a drop in exports and weak business investment amid heightened trade uncertainty; the Bank's preferred core inflation measures remained near 3% in September 2025, above its 2% target; and tariff-related trade uncertainty continues to cloud the outlook.6 Whether there are further cuts will depend on how inflation and the economy develop.

For private mortgage borrowers in Ontario, 2026 presents an improved but not yet fully resolved market. The best thing about falling bank rates is that they make exit strategies more achievable. A borrower who could not pass the stress test when rates were higher may find it easier to qualify as rates come down. The path from private to conventional is getting shorter.

The conversations happening now are different from 2023. Instead of "how do we survive this rate environment," we are discussing "what specific steps do you need to take in the next 6 to 12 months to qualify for a bank mortgage?" That shift in tone reflects real progress, even if the work is not yet done.

The rate cycle has turned, the rules have loosened, and the exit paths are widening. If you are in a private mortgage today, it may be a good time to start planning your transition to conventional financing.