The History of MICs in Canada

Mortgage Investment Corporations (MICs) have become a significant part of the Canadian investment landscape, especially for those seeking alternative investments. They offer a unique way to engage in real estate investing, providing opportunities that are both lucrative and relatively secure. Let’s delve into the history of MICs in Canada and understand their evolution.

Origins of Mortgage Investment Corporations

Mortgage Investment Corporations (MICs) were established in 1973 under the Residential Mortgage Financing Act. The popularity of pooled mortgage funds managed by MICs grew noticeably by 1981 when Parliament estimated that over $5 billion in mortgage financing was necessary to meet the needs of the expanding population and real estate development across Canada.

Since 1985, MICs have been chiefly governed by the Income Tax Act, which outlines the regulations for MICs and their shareholders.

MICs offered a way for small investors to engage in the residential and commercial real estate markets more easily. They typically provide short-term loans, lasting from 6 to 36 months, secured by Canadian real estate. MICs were designed to provide individual investors with an opportunity to invest in a diversified pool of mortgages, thereby mitigating some of the risks associated with lending and real estate investments.

Growth and Development in the 1980s and 1990s

The 1980s and 1990s marked a period of significant growth for MICs. During this time, the Canadian real estate market experienced various cycles of boom and bust, which underscored the need for alternative investment products. MICs filled a crucial gap left by traditional banking institutions, which faced regulatory restrictions that limited their ability to offer certain types of loans. By providing more flexible lending solutions, MICs attracted investors interested in real estate without the complexities and risks of direct property ownership.

Regulatory Changes and Modernization

In the early 2000s, regulatory changes aimed at improving transparency and protecting investors led to the modernization of MICs. The Canadian government introduced stricter reporting requirements and better-defined operational guidelines to enhance investor confidence. These regulatory improvements helped MICs gain more popularity as an alternative investment, offering attractive potential returns while mitigating some of the risks associated with direct real estate investment.

MICs and the Canadian Real Estate Market

MICs have played a crucial role in the Canadian real estate market, particularly in regions like Victoria, where real estate demand remains high. They provide a way for investors to participate in the real estate market without the need to manage physical properties. This has been especially appealing in a market characterized by high property prices and significant barriers to entry for individual investors.

Benefits of Investing in MICs

Investing in MICs offers several advantages. These include:

  1. Diversification: MICs pool funds from multiple investors to invest in a diversified portfolio of mortgages. This diversification helps reduce risk.
  2. Professional Management: MICs are managed by professional fund managers who have expertise in real estate lending and investment.
  3. Regular Income: MICs typically pay regular dividends to investors derived from the interest payments on the mortgages they hold.
  4. Access to Real Estate Market: Investors can gain exposure to the real estate market without the need to directly purchase and manage properties.

The Future of MICs

Looking ahead, MICs are expected to continue playing a vital role in the Canadian real estate market. The demand for alternative investments, the ongoing need for flexible lending solutions, and the changing rates within the real estate market and the general economy will likely drive future growth in MICs. 

MICs have a rich history in Canada, evolving from their inception in 1973 to become a crucial component of the alternative investment landscape. They offer a unique way to engage in real estate investing, providing a balanced approach to risk and return. For those interested in exploring the benefits of MICs further, contact Jordan on our team to learn how mortgage investments can enhance your investment portfolio.

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