The mortgage slowdown has claimed its latest victim as Toronto-based EQB Inc. announced it’s cutting approximately 8% of its workforce as part of a broader restructuring plan. The digital bank and alternative mortgage lender, formerly known as Equitable Group, framed the move as necessary to “streamline operations and enhance efficiency” amid challenging market conditions.
For roughly 120 employees receiving pink slips this week, the corporate-speak offers little comfort. The cuts come during what banking analysts describe as a perfect storm for Canadian lenders – stubbornly high interest rates, cooling real estate markets, and intensifying competition from fintech disruptors.
“When mortgage originations slow significantly, staff reductions unfortunately become inevitable,” says John Aiken, financial services analyst at Jefferies. “EQB built capacity for growth that simply hasn’t materialized in this rate environment.”
The restructuring marks a strategic pivot for EQB, which has positioned itself as Canada’s “Challenger Bank” and made ambitious moves in recent years, including the $200 million acquisition of Concentra Bank in 2022. That deal significantly expanded EQB’s national footprint and added approximately 200 employees to its workforce.
Company executives indicated the layoffs would generate annual cost savings of approximately $15 million beginning in fiscal 2025. EQB anticipates recording a one-time restructuring charge between $9 million and $11 million in the fourth quarter of 2024, primarily related to severance payments.
The staff reductions arrive against a backdrop of broader cooling in Canada’s financial sector. The Bank of Canada’s aggressive rate hiking cycle, which took the overnight rate from 0.25% to 5% between March 2022 and July 2023, has significantly dampened mortgage demand. According to data from the Canadian Real Estate Association, home sales activity in September was down 23.2% from the previous year.
“What we’re seeing is a recalibration across the entire lending ecosystem,” explains Claire Celerier, Associate Professor of Finance at the University of Toronto’s Rotman School of Management. “Alternative lenders like EQB are particularly vulnerable during interest rate shocks because they don’t have the same deposit base as traditional banks to cushion margin pressure.”
EQB’s stock has struggled throughout 2024, declining approximately 15% year-to-date, underperforming the broader S&P/TSX Composite Index. However, following the restructuring announcement, shares ticked up 2.3% in morning trading as investors responded positively to the cost-cutting measures.
The bank has been forced to navigate a delicate balance – maintaining growth while managing expenses in a housing market that remains surprisingly resilient but significantly less active than during the pandemic boom. In its most recent quarterly results, EQB reported conventional loan growth of just 2% year-over-year, well below historical averages.
“The pandemic created artificial demand conditions that required additional staffing,” says Graham Priest, portfolio manager at Guardian Capital. “Now we’re seeing the hangover effect as lenders right-size for normalized volumes.”
For employees affected by the cuts, the timing is particularly challenging. Rising living costs, combined with a job market that’s showing signs of cooling across multiple sectors, creates significant pressure for displaced workers. While financial services professionals typically possess transferable skills, the simultaneous slowing across adjacent industries like real estate and technology complicates the transition.
EQB isn’t alone in tightening its belt. Earlier this year, First National Financial, Canada’s largest non-bank mortgage lender, implemented its own cost-reduction program. Meanwhile, several major Canadian banks have conducted more targeted workforce adjustments throughout 2024.
The layoffs reflect broader structural shifts in Canada’s financial landscape. Digital transformation initiatives that accelerated during the pandemic have allowed lenders to automate more processes, reducing the need for certain roles. Simultaneously, rising compliance costs and competitive pressure from both established banks and fintech startups have squeezed margins.
“We’re witnessing a reconfiguration of the mortgage ecosystem,” says Avi Goldfarb, economist and Rotman Chair in Artificial Intelligence and Healthcare at the University of Toronto. “Technology is enabling lenders to do more with less, but regulatory complexity and market volatility create countervailing forces that make these transitions bumpy.”
For borrowers, the implications of industry consolidation remain unclear. While fewer players could theoretically reduce competition, the digital nature of modern lending means barriers to entry remain relatively low for new competitors. The more immediate impact may be felt in service levels as remaining staff absorb additional responsibilities.
EQB’s CEO Andrew Moor has emphasized that the restructuring is about positioning the bank for “sustainable growth” once market conditions improve. The company’s digital-first approach and specialized lending focus have historically allowed it to capture market share from traditional banks, particularly in segments like self-employed borrowers and newcomers to Canada.
Whether this strategic reset will succeed depends largely on when – and how quickly – Canada’s housing market regains momentum. With the Bank of Canada beginning its easing cycle and economists projecting several additional rate cuts through 2025, mortgage demand may soon rebound. But for EQB employees facing an uncertain future, that recovery can’t come soon enough.
