Why Commercial Insolvencies Peaked Before Rates Started Falling: A Timing Problem
The Bank of Canada began cutting its policy rate in June 2024, and more than two years later, insolvency filings among Canadian developers remain elevated but have declined from their 2024 peak. They reached their peak in 2024 but have declined through 2025 and into 2026. The Office of the Superintendent of Bankruptcy continues to list construction among the top sectors for business insolvencies.
Those numbers fit together once you look at when a loan actually feels the rate. Debt bites on the day it comes due. A falling policy rate helps borrowers whose loans renew this month, but it does little for a project whose financing was priced back when the policy rate sat at 0.25%. If you lend to, build or buy into development projects, that timing decides which deals survive, and it also tells you where the next few years of opportunity and shortage will come from.
The renewal date matters more than the rate headline
Developers usually buy land with short-term, interest-only loans and plan to replace them with construction financing once the project is ready. While they wait, they pay interest to carry the land.
Here's an illustrative example. A $10 million land loan at 3% costs $300,000 a year in interest. If that loan matures and renews at 7%, the carrying cost becomes $700,000 a year on the same dirt. A few rate cuts might bring the renewal down to 6%, or $600,000. That's welcome, and it still doubles what the project was built to handle.
So the useful question about any deal is simple: what rate was this debt originally priced at, and when does it reset? A project financed at the low point and maturing in 2026 can be in trouble even while rates fall.
Lower values turn a renewal into a cash call
The rate is only half of the renewal. Lenders also re-measure the asset. The gap between what it costs to build a unit and what buyers will pay has widened, and higher consumer mortgage rates have made pre-sale targets harder to hit. Banks generally won't release construction money until enough units are pre-sold.
When a lender re-values a site lower and lends a smaller amount against it, the developer has to cover the difference in cash. Many can't. Lenders often extend loans for a while to avoid forcing a sale, which is why fenced-off "zombie sites" sit idle around cities while debt gets restructured. Extensions buy time. They don't remove the shortfall, and that's why failures keep surfacing well after rates start to come down.
Lenders loosen slower than the Bank of Canada does
Even as policy rates ease, lenders tend to keep their own requirements strict for years. Right now money is flowing mostly to builders with strong track records and real cash on hand. Developers who bought land years ago, or carried little debt, are still doing fine. The strain is concentrated among those who bought near the peak with heavy borrowing.
Projects that do get funded are shifting shape. In Alberta, many developers have moved from condo towers toward purpose-built rentals, helped by the federal 100% GST rebate on new rental housing. In Edmonton, townhomes and duplexes are drawing steadier interest than large commercial towers, and lower land costs give local builders a little more room than their counterparts in Toronto or Vancouver.
Where this leaves capital in Alberta
Two things follow. Stalled and distressed projects are being sold at discounts, and investors with available cash and the patience to finish them are finding real openings. And the projects that don't start today are homes that won't be finished in two or three years. Alberta's steady population growth from other provinces keeps a floor under demand, which points toward tighter supply down the road, especially for people hoping to buy rather than rent.
Before you lend, invest or renew, put the maturity date and the original rate side by side for every loan in the deal. If the gap between them is wide, the rate cuts haven't reached that project yet, and the price you pay should reflect it.
The Bank of Canada began cutting its policy rate in June 2024, and more than two years later, insolvency filings among Canadian developers remain elevated but have declined from their 2024 peak. They reached their peak in 2024 but have declined through 2025 and into 2026. The Office of the Superintendent of Bankruptcy continues to list construction among the top sectors for business insolvencies.
Those numbers fit together once you look at when a loan actually feels the rate. Debt bites on the day it comes due. A falling policy rate helps borrowers whose loans renew this month, but it does little for a project whose financing was priced back when the policy rate sat at 0.25%. If you lend to, build or buy into development projects, that timing decides which deals survive, and it also tells you where the next few years of opportunity and shortage will come from.
The renewal date matters more than the rate headline
Developers usually buy land with short-term, interest-only loans and plan to replace them with construction financing once the project is ready. While they wait, they pay interest to carry the land.
Here's an illustrative example. A $10 million land loan at 3% costs $300,000 a year in interest. If that loan matures and renews at 7%, the carrying cost becomes $700,000 a year on the same dirt. A few rate cuts might bring the renewal down to 6%, or $600,000. That's welcome, and it still doubles what the project was built to handle.
So the useful question about any deal is simple: what rate was this debt originally priced at, and when does it reset? A project financed at the low point and maturing in 2026 can be in trouble even while rates fall.
Lower values turn a renewal into a cash call
The rate is only half of the renewal. Lenders also re-measure the asset. The gap between what it costs to build a unit and what buyers will pay has widened, and higher consumer mortgage rates have made pre-sale targets harder to hit. Banks generally won't release construction money until enough units are pre-sold.
When a lender re-values a site lower and lends a smaller amount against it, the developer has to cover the difference in cash. Many can't. Lenders often extend loans for a while to avoid forcing a sale, which is why fenced-off "zombie sites" sit idle around cities while debt gets restructured. Extensions buy time. They don't remove the shortfall, and that's why failures keep surfacing well after rates start to come down.
Lenders loosen slower than the Bank of Canada does
Even as policy rates ease, lenders tend to keep their own requirements strict for years. Right now money is flowing mostly to builders with strong track records and real cash on hand. Developers who bought land years ago, or carried little debt, are still doing fine. The strain is concentrated among those who bought near the peak with heavy borrowing.
Projects that do get funded are shifting shape. In Alberta, many developers have moved from condo towers toward purpose-built rentals, helped by the federal 100% GST rebate on new rental housing. In Edmonton, townhomes and duplexes are drawing steadier interest than large commercial towers, and lower land costs give local builders a little more room than their counterparts in Toronto or Vancouver.
Where this leaves capital in Alberta
Two things follow. Stalled and distressed projects are being sold at discounts, and investors with available cash and the patience to finish them are finding real openings. And the projects that don't start today are homes that won't be finished in two or three years. Alberta's steady population growth from other provinces keeps a floor under demand, which points toward tighter supply down the road, especially for people hoping to buy rather than rent.
Before you lend, invest or renew, put the maturity date and the original rate side by side for every loan in the deal. If the gap between them is wide, the rate cuts haven't reached that project yet, and the price you pay should reflect it.
Sources
Read Next
Three 2026 Mortgage Hall of Fame Careers Trace How Canadian Lending Changed
A Tesla and SpaceX Merger Solves Musk's Problems and Hands Shareholders His Risks
Prem Watsa's IDBI Bet Tests What Foreign Capital Can Do in Indian Banking
Credit Markets Are Quietly Pricing an AI Borrowing Risk Tech Stocks Ignore