Definition
The secondary mortgage market encompasses all transactions where existing mortgages are sold or securitized between financial institutions, governments and institutional investors.
**How it works in Canada**: - Mortgage lenders (banks, credit unions, trust companies) grant loans on the primary market - To refinance their balance sheets, they pool these mortgages and sell them as mortgage-backed securities (MBS) - In Canada, CMHC purchases and guarantees MBS through the Canada Mortgage Bond (CMB) and NHA Mortgage Bond programs
**CMHC's role**: - Canada Mortgage Bond (CMB) program: CMHC purchases pools of insured mortgages and issues CMBs sold to investors - Government guarantees CMBs → lower borrowing rates → savings partially transmitted to borrowers
**Impact on rates**: - Strength or weakness of the secondary market influences fixed rates offered by lenders - During liquidity stress (e.g., 2008 crisis), secondary market contracts → lenders must finance on their balance sheets → rates rise
**Private securitization**: Uninsured (conventional) mortgages are sometimes securitized through private conduits (Asset-backed commercial paper — ABCP), a more limited and less standardized market in Canada than in the US.