Canada’s sub-prime mortgage market is growing fast, but it’s still a tiny part of the overall market, says CIBC World Markets Inc.

In the report How shadowy is mortgage lending in Canada, the firm examines the risk posed by the rising role of less-regulated lenders in the Canadian mortgage market. It uses several different measures to quantify the significance of alternative/non-prime lending within that market.

For instance, the report notes that lending by non-depository lenders has doubled since 2012, and is still rising by a year-over-year pace of more than 20%. Yet, their share in total mortgage outstanding is still a trivial 2.5%, it says.

Entities that are not supervised by federal banking regulators also count for a rising share of issuance of mortgage-backed securities, it says. Yet, it notes that the share of the less regulated entities in the mortgage market as a whole is less than 5%.

“The bottom line is that regardless of how you measure it, alternative/non-prime lending, while rising, is still an extremely small portion of total mortgage activity in Canada — probably smaller than perceived by many,” the report concludes.

“That is not to suggest that the system is risk free,” it adds. “The risk we are facing today is that increased regulations on major financial institutions combined with even lower mortgage rates may work to widen those shadowy margins.”