Why the mortgage renewal wave hasn’t spiralled into a crisis

Canada’s 2025-26 mortgage renewal wave has so far fallen short of the chaos once feared, although pockets of strain remain with borrowers in some Canadian cities facing deeper challenges than others.

That’s according to a report released last week by Canada Mortgage and Housing Corporation (CMHC), which showed mortgage arrears – while rising – remain low by historical standards even despite a steady uptick.

Unsurprisingly, borrowers in the pricey Toronto and Vancouver markets are seeing the steepest affordability hurdles at renewal time, but there still seems no sign of the mortgage market disaster some predicted as the renewal wave loomed.

Stress test plays its part

CMHC’s deputy chief economist Tania Bourassa-Ochoa (pictured top) sees a few reasons for that – including the mortgage stress test, sometimes maligned but also viewed as an important way of safeguarding Canada’s financial system.

Regulation has played a significant role in mitigating risk in the Canadian mortgage market, Bourassa-Ochoa told Canadian Mortgage Professional, even despite some of its downsides.

“All these years of mortgage regulation tightening that we’ve witnessed for the last decade – yes, it has kept a lot of first-time homebuyers on the sidelines and yes, it has made it a lot more difficult for people to qualify,” she said.

“But in retrospect it did really limit that increase in mortgage arrears or at least the speed of it – because we were able to stress test these borrowers, basically from the outset. That stress test did act as a safeguard and is limiting what could have been a lot worse.”

Extended amortizations, allowing borrowers to pay down their mortgage over a longer period when renewing, have also helped them navigate some of the challenges posed by higher rates.

“Financial institutions were very proactive in identifying potential riskier borrowers, looking for these adjustments to their mortgage terms at renewals or looking at different choices to make sure these borrowers were kept afloat,” Bourassa-Ochoa said. “I think the proactiveness really helped the trend that we’re seeing right now.”

Those longer amortizations can be seen as a double-edged sword – effective in the short term for helping borrowers manage their mortgage payments, but ultimately keeping them indebted for longer.

Bourassa-Ochoa described the arrangement as a trade-off between short-term financial relief and long-term wealth, with more interest ultimately being paid for a longer period down the line.

Longer-term outlook bleakest in Toronto

Mortgage arrears are still low in Toronto, the most troublesome Canadian city where delinquencies are concerned, but they’ve quadrupled since just after the pandemic and are projected to continue rising in the year ahead.

Home prices have slipped across the Greater Toronto Area (GTA) over the past two years, but it remains one of the country’s most expensive housing markets – a key reason for homeowners’ affordability struggles.

And the disaster that’s befallen Toronto’s condo sector is also playing a part, causing strain for scores of investors who’ve seen their investments in condo rental properties turn sour.

“When you look at Toronto, just by the mere fact that this is a high-priced market means that borrowers there also have larger mortgages and are more leveraged,” Bourassa-Ochoa said. “So they have higher levels of debt.

“The investor story is also very important in this context. You have a market that has a high share of investors in the condo segment. We know that in the last few years we’ve seen carrying costs increase quite significantly: property taxes, condo fees, insurance, even mortgage rates.

“It’s harder to rent right now. There are longer leasing times. And that’s resulting in a lot of investors that are now in a negative cashflow position. So whether you’re a homeowner or an investor in the condo market in Toronto right now and you’re highly indebted and renewing your mortgage, that is definitely putting a lot more pressure in that sense.”

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!

Unemployment drop expected to keep BoC on hold for 2026

Canada’s jobless rate slipped to 6.5% in January, its lowest level since September 2024. The move is expected to strengthen the case for the Bank of Canada to sit tight on interest rates through 2026 rather than deliver more relief for borrowers.

Statistics Canada reported that the decline was driven not by hiring, but by fewer Canadians looking for work, sharpening questions about how much slack really remained in the labour market.

Unemployment fell 0.3 percentage points from December’s 6.8% as the number of people searching for work dropped by about 94,000, or 6.1%.

The participation rate slid 0.4 percentage points to 65%, with much of the pullback concentrated in Ontario. Employment, meanwhile, decreased by roughly 25,000 on the month, and the employment rate edged down to 60.8%, its first decline since August 2025. Manufacturing bore the brunt of the hit, shedding about 27,500 positions, most of them in Ontario, as United States tariffs continue to weigh on factory payrolls.

Job losses masked by shrinking labour force

“Canada's job market started the new year on a mixed note. The economy lost jobs, but the unemployment rate still fell as fewer people looked for work last month,” Tony Stillo, director of Canada economics at Oxford Economics, said. He added that employment decreased by 25,000 in January and that “the employment to population ratio edged down 0.1ppt to 60.8%, its first dip since August.”

However, Stillo said the jobless rate still moved lower as “slower population growth and a large drop in the participation rate caused the labour supply to shrink by around 90,000 m/m,” the biggest monthly decline since January 2022, when lockdowns pushed many people out of the labour force.

“We've long highlighted that a shrinking labour supply would put downward pressure on the unemployment rate, and that trend will likely persist as the population shrinks in the months ahead,” he said.

Rate path seen steady – and what it meant for mortgages

Stillo said more job losses are likely in the first half of 2026 as “still elevated trade policy uncertainty and US tariffs combine with weak domestic demand to curb employment demand and trigger modest layoffs,” with job growth resuming only around mid‑year and the renegotiation of United States-Mexico-Canada agreement (USMCA) on July 1 described as “pivotal.” 

He also said that, like the central bank, Oxford Economics still sees slack in the labour market and “expect the BoC to remain on hold though 2026, before lifting the overnight rate back to 2.75% by mid‑2027.” 

The Bank of Canada already held its policy rate at 2.25% at its January 28 decision, judging that the current setting was “appropriate” as long as the outlook for modest growth and near‑2% inflation stayed intact.

Market economists, including RBC and TD, similarly expect a prolonged hold through 2026, warning that unpredictable US tariffs and the USMCA review make any sudden move unlikely.

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!

No sign of a quick 2026 turnaround in Toronto's housing market, warns TRREB

Toronto’s housing market started 2026 on the back foot, with fresh numbers from the Toronto Regional Real Estate Board (TRREB) pointing to a quieter, more buyer-friendly landscape, and little sign of a quick turnaround.

Home sales in the Greater Toronto Area fell 19.3% year over year to 3,082 transactions in January, while the average selling price dropped 6.5% to $973,289. The MLS Home Price Index composite benchmark slipped 8%.

New listings were also lower, down 13.3% to 10,774, and active inventory rose 8.1% to 17,975 as properties stayed on the market longer.

“January’s market data reflect a continuation of a slower start to the year compared to a year ago, as affordability challenges and economic uncertainty remain top of mind for many buyers,” TRREB said.

Market balance tilted further toward buyers, with average days on market rising to 45 from 37 and property days on market climbing to 67 from 55.

“While there are signs that some buyers are taking advantage of a broader selection of homes and more balanced conditions, home sales continue to be suppressed relative to early 2025 as market participants adapt to the current interest rate environment,” TRREB said.

Sales drops were broad-based: detached transactions fell 13.6%, semis were down 19.2%, townhouse sales declined 23.7% and condo apartment sales slid 26%.

Prices also softened across the board, with detached values down 7.4%, semis down 9.7%, townhouses off 9.4% and condo prices down 9.8%.

Meanwhile, an Ipsos survey in the board’s 2026 Market Outlook found only 22% of GTA households intend to buy this year, down five percentage points from 2025, even as TRREB projected 60,000 to 70,000 sales and an average price range of $1 million to $1.03 million. 

TRREB president Daniel Steinfeld said “affordability has improved, but uncertainty continues to weigh on long term decisions like homeownership,” adding that “greater economic clarity in the months ahead could restore confidence and help unlock demand that has been building for several years.”

Despite this, new survey across Vaughan, Mississauga, Brampton, Durham Region and Simcoe County shows overwhelming concern about housing costs and strong support for cutting government-driven charges on new construction.

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!

Why a flurry of rate cuts is a real possibility under Trump's new Fed chair

Kevin Warsh, President Trump’s choice for next Federal Reserve chair, can’t simply snap his fingers and move interest rates dramatically lower – that much is clear.

But the influence the leader of the Fed can exert over fellow decisionmakers, many of whom look to the chair for direction on rate policy, suggests Warsh may have less trouble convincing members of the Federal Open Market Committee (FOMC) to vote for rate cuts than some analysts believe, according to a top mortgage lawyer.

Marty Green (pictured top), principal at Polunsky Beitel Green, told Mortgage Professional America he doesn’t necessarily subscribe to the view that Warsh, as just one of 12 FOMC members, would be blocked from pushing through cuts by a hawkish majority on the committee.

“I think one of the dynamics about the Fed that’s really interesting is that if you feel strongly as a current governor or one of the committee participants, you certainly are entitled to vote your conscience, and we see people do that with dissents from time to time,” he said.

“But generally, they kind of operate pretty unanimously for the most part and I think that’s partly because there’s a protocol that if you’re on the fence about it or you see possibilities both ways, you have a tendency to vote with the chair. And so I think that’s to some extent where that is going to come into play and be more important – those votes where people could see some case for cutting rates.”

Will Fed members continue to follow the leader under Warsh?

Current Fed chair Jerome Powell, whose term expires in May, has taken a careful approach to rate policy in recent years, frequently drawing Trump’s ire for refusing to consider big reductions.

FOMC members have generally endorsed that approach, with only two – Stephen Miran and Christopher Waller – voting against last week’s decision to hold rates steady instead of cutting by 25 basis points.

Warsh, though, will be expected by Trump to take a more dovish approach and advocate lower rates – and Green sees other Fed decision-makers being receptive to that view.

“If the chair is voting towards cutting rates, [other FOMC members] may follow suit,” he argued, “just because I think they see that as an important element of the Fed – to act as unanimously as possible and so that protocol may be followed.”

That’s not to say they’ll be easily swayed. Much will depend, Green said, on how quickly Warsh is able to establish credibility with other committee members and how strong his argument is that rates could be lower.

Warsh’s time as a member of the Fed’s board of governors between 2006 and 2011 could prove helpful, Green said, giving him more of an understanding of the central bank’s inner workings than some of the outsider candidates who were reportedly in the race to succeed Powell.

And a shift away from Powell may also mean a change in how the Fed judges the economy’s current health and where it’s headed in the coming months.

“I think Warsh may be wanting to look at additional data and bring a fresh perspective of what might provide better guidance for where the economy is going in the future,” Green said. “He’s certainly been critical of how the Fed has done things in the past, which is one of the reasons that I think he was attractive to the president.

“So I do think there will be some change in terms of how they view data, what data they look at, and how much weight they give to it.”

Expect a big push by Warsh to bring other FOMC members on board

Warsh’s first meeting as Fed chair – if he’s confirmed – is scheduled to take place in June. Markets currently see that decision as the likely first rate cut of the year, although Green said it might take longer for Trump’s choice to bring the other FOMC members around to his way of thinking.

“I don’t know that he’ll be able to change their opinion at the first meeting,” he said, “but how he presents the data at the first meeting may actually set the stage for… perhaps doing a cut [later] and maybe doing a more significant one if they delay it.”

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!

What Trump’s Fed pick means for Canada

Donald Trump ended months of speculation last week by naming his choice to lead the Federal Reserve when current chair Jerome Powell’s term expires in May, a decision that could have big implications for Canada.

The president announced on Friday he had chosen Kevin Warsh – a former bank executive and member of the Fed’s board of governors in the late 2000s – to head the central bank, ending a race that was closely followed by Canadian financial and mortgage market watchers.

The Fed’s approach to interest rates strongly impacts US Treasury yields, which in turn have a big effect on Government of Canada bond yields and, by extension, Canadian fixed mortgage rates. That means even though the Fed doesn’t decide policy for Canada, its decisions set the backdrop for mortgage rates here.

It’s also significant because a big divergence between the Fed and the Bank of Canada can put pressure on the loonie – and Trump has long advocated much steeper US rate cuts, which could leave the Fed substantially more dovish than the Bank of Canada if policymakers in Ottawa stay cautious.

Warsh was viewed by some observers as a surprisingly hawkish pick for the Fed by Trump, having often highlighted the risk posed to the inflation outlook by lower interest rates. But the president will likely still expect the incoming Fed chair to slash rates, potentially complicating the outlook for the Bank of Canada.

The good news for Canada: Warsh could find the task of dramatically cutting rates much easier said than done.

Why the new Fed chair may not be able to cut rates right away

Speaking to Canadian Mortgage Professional last week before Trump announced Warsh as his pick, Bank of Montreal (BMO) chief economist Doug Porter (pictured below) noted financial markets were taking a calm approach to the impending decision – potentially because a Fed chair can’t simply snap their fingers and lower rates.

“What I find interesting is that financial markets, which know darn well what’s going on here, are really not pricing in anything unusual for the rest of the year,” he said. “In the US financial markets, they’ve got just a little bit less than two rate cuts built into the market forecast through the rest of this year, with most of it starting around the June meeting and then another one in the second half of the year at some point.

“That’s not exactly a radical forecast. So despite all the noise around the Fed, the market’s still pretty comfortable that nothing really unusual is going to transpire for US interest rates this year, because I think the view is that the governance structures there will not allow a new Fed chair to just rule the roost and do whatever they want.”

The Fed chair is just one of 12 decisionmakers on the Federal Open Market Committee (FOMC), which votes on rate policy at eight scheduled meetings each year.

Two FOMC members voted for a rate cut in last week’s decision – but 10 favoured a hold, meaning supporters of a 25-basis-point reduction were comfortably outnumbered.

“There are 12 voters on the FOMC. And precious few of them turn over in any given year,” Porter said. “So even though there’s a lot of noise around the Fed, the market’s view – and I think, most forecasters’ view – is not a lot is really going to happen in terms of what really goes on with US interest rates.”

Other US-Canada challenges lie ahead for BoC

While that means the Bank of Canada may be able to breathe a sigh of relief for now on the Fed’s potential impact on its own rate policy, plenty of other aspects of the US-Canada relationship continue to present challenges for the year ahead.

There’s no sign of an end to the trade tensions that have rumbled since Trump launched his wave of global tariffs last year – and the Canada-United States-Mexico Agreement (CUSMA) is also up for review in July, sparking the prospect of difficult and complex negotiations.

Bank of Canada governor Tiff Macklem suggested those discussions could complicate the economic outlook for the year ahead, although Porter didn’t detect any panic from the central bank.

“I actually have the sense they’re quietly optimistic on that front, probably more so than I am,” he said. “I’m personally quite concerned about them actually being able to reach a deal this year. But I would love to be surprised.

“I think they know these are not going to be easy negotiations. Canada is probably going to have to give way on something. It’s just a matter of where and by how much.”

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!