Overview
Builders Capital, a leading provider of mortgages for builders and short-term construction financing in Western Canada, remains conservative amid tariff uncertainty, rising construction costs and regional market shifts. This quarter’s update outlines how we are managing risk across our portfolio of loans for builders, and our geographic underwriting adjustments in response to market conditions.
Market conditions & lending response
Ongoing tariff and trade tensions have prompted a cautious "wait and see" approach among developers and buyers. Builder clients report reduced foot traffic and property showings — a trend that may soften resale markets, slow capital turnover, and increase delinquency risk for construction loans and loans for builders.
Builders Capital is maintaining conservative underwriting, prioritizing lower loan-to-value targets on new originations and increasing loan loss provisions where appropriate.Portfolio metrics & provisions
During the quarter we reported a weighted average loan-to-value (LTV) of 76.2%, slightly above our 75% conservative target. Because LTV is a core predictor of loss severity should markets weaken, this deviation contributed to management’s decision to increase loan loss provisions in Q2 2025.
Construction costs, tariffs and land supply
Construction costs remain elevated, notably due to higher sub-trade labour rates. The recently introduced tariff framework has created uncertainty around material pricing — it remains unclear which materials are subject to tariffs and which are exempt. At the same time, available lot inventory has risen, which could exert downward pressure on land costs over time.
The net effect on demand for construction financing will depend on consumer response to uncertainty and any resulting inflation or interest-rate shifts.
Regional outlook: Alberta & British Columbia
Alberta continues to show robust demand for entry-level and mid-market homes, driven by migration from higher-cost provinces. The province’s relative affordability sustains interest in both single-family and multi-family construction projects — supporting ongoing demand for our mortgages for builders.
In British Columbia, affordability constraints and longer selling times have prompted a strategic reduction of exposure in the Lower Mainland. As part of portfolio rebalancing, we are refocusing new underwriting into jurisdictions that better support development and predictable returns for construction loans.
Enforcement updates
At year-end we had three loans in British Columbia in the enforcement process. During the first half of 2025:
- Two loans were liquidated in enforcement, resulting in a combined write-off of $59,315.
- The third loan’s property — a vacant lot in Kelowna — was turned over to Builders Capital Mortgage Corp. and is currently listed for sale at $139,900.
Risk management & strategy
Management increased loan loss provisions compared to 2024 to reflect softening conditions in B.C. and uncertainty stemming from tariff impacts on construction margins for builder clients. These provisions help protect portfolio stability while we continue to provide prudently underwritten loans for builders and targeted construction financing.
Our strategic priorities remain:
- Conservative underwriting for new originations (lower LTV targets).
- Geographic reallocation of lending away from lower-value regions of the Lower Mainland.
- Focus on affordable product types and jurisdictions that support development activity.
Closing remarks
While downside scenarios may not ultimately materialize, Builders Capital continues to adopt a cautious approach consistent with prior quarters. That conservative stance positions the company to continue supporting builders with reliable mortgages for builders, flexible construction financing, and disciplined risk management during a period of elevated uncertainty.
