Here's how homeowners are coping with mortgage renewals in a choppy economy

Toronto’s sharp rise in mortgage delinquencies turned renewal time into a stress test for many homeowners – especially those who bought at peak prices during the pandemic, according to mortgage broker Victor Tran of Rates.ca.

The number of borrowers in arrears in the Greater Toronto Area more than quadrupled from 2022 to late 2025, Canada Mortgage and Housing Corporation (CMHC) data showed, even as the overall delinquency rate remained low by historical standards.

Nationally, arrears also edged up but still sat around a quarter of one percent of mortgages.

Arrears rose – but most borrowers still paid

“At first glance, the increase sounds alarming, but the overall delinquency rate remains low,” Tran said.

“It reflects the strain higher rates are putting on monthly payments at renewal, especially for homeowners who bought during the pandemic, rather than widespread foreclosure risk.”

CMHC modelling suggests arrears would continue rising moderately through late 2026, with Toronto leading delinquency growth as high household debt, softer prices and a weaker labour market squeeze borrowers.

Federal watchdog Office of the Superintendent of Financial Institutions (OSFI) likewise warned of “mortgage payment shocks” as more than one‑third of Canadian mortgages come up for renewal by the end of 2026, even after rate cuts.

Tran stressed that lenders generally prefer to avoid taking properties back. “Lenders typically want to avoid foreclosure,” he said. “It’s costly and time‑consuming, which means lenders are often motivated to work with homeowners to find solutions that keep them in their homes.”

He pointed to extending amortizations, refinancing to roll in higher‑interest debt, or restructuring terms to improve monthly cash flow as options borrowers explore when payments become tight.

Options narrowed for borrowers who waited

Still, renewal has not guaranteed flexibility. Homeowners who no longer meet qualification rules often have to stay with their existing lender, Tran noted, limiting their ability to shop the market or access equity even with a perfect payment history – a constraint regulators and consumer‑credit agencies also highlighted as renewals reset at higher rates.

“Missed payments usually don’t happen all at once,” Tran said. “As renewals roll through at higher rates, pressure builds month by month, especially for homeowners with tighter budgets, and many don’t realize how quickly options can narrow if they wait until close to renewal to revisit how their mortgage is structured.”

For Toronto borrowers heading into renewal, Tran’s message is that early engagement matters: understand how arrears are treated, assess income and debt before signing a new term, and approach the lender – or a broker – while there is still time to adjust the mortgage rather than after a missed payment forces the issue.

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Toronto is fast becoming Canada's hotspot for mortgage arrears

For mortgage industry members and market watchers who’ve seen how Ontario’s economy has struggled in recent years, it likely came as no surprise to hear that Toronto’s rate of mortgage arrears currently leads the country.

Canada Mortgage and Housing Corporation (CMHC) research released last week showed delinquency risk saw its “strongest and most persistent increase” in Toronto, spurred by a range of factors including higher household debt levels, a slowing housing market, and a gloomy jobs outlook.

The city’s delinquency trends still aren’t cause for panic with rates low by historical standards. But they suggest Toronto homeowners are grappling with strain that isn’t being felt elsewhere in the country, signalling sharper pain from the much-discussed mortgage renewal wave.

And the trouble that’s roiled the city’s condo market over the past two years certainly hasn’t helped, presenting unforeseen challenges for investors suddenly faced with a looming cash crunch.

Higher carrying costs, investor woes add to Toronto’s arrears problem

The investor story is an important one in Toronto’s overall arrears outlook, CMHC deputy chief economist Tania Bourassa-Ochoa told Canadian Mortgage Professional, because of the high concentration 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 as well,” she said.

“And it’s harder to rent [out] right now – longer leasing times, a lot of competition out there. Some are offering one free month, two free months. And that’s resulting in a lot of investors that are now in a negative cashflow position.”

Those pressures are weighing against plenty of so-called “mom-and-pop” investors renewing their primary mortgage, while other homeowners are lumbered with mortgage costs and debt loads significantly higher than most other parts of Canada.

For investors saddled with an unprofitable condo, there are no quick fixes in a bleak market. “The market liquidity is not there,” Bourassa-Ochoa said. “If you’re facing the unwanted situation of having to sell your property, prices in the condo segment have declined by 20% since the peak in 2022 to today.

“If you look only at presales in Toronto, at the current level of inventory that has piled up and the current level of demand for these preconstruction condos, it would take something like 15 years for the current demand to absorb the condos. And that’s obviously resulting in higher mortgage arrears.”

Among the cohorts struggling the most with mortgage arrears and renewals across Canada are first-time homeowners who purchased during the pandemic.

Many of those buyers were able to purchase a home – even at a higher price – because of the rock-bottom interest rates of the COVID-19 era, but have seen borrowing costs spike after 2022 as rates climbed.

That trend was particularly strong in Canada. “Those pandemic-era first-time homebuyers were very present in the Toronto area,” Bourassa-Ochoa said. “The GTA [Greater Toronto Area] had a lot of those. And that’s yet another factor that’s driving that regional risk.”

No sign of a crash yet despite rising arrears

Toronto may be experiencing a more rapid growth in mortgage arrears than other Canadian markets, but experts are still stopping well short of forecasting a meltdown in the city’s housing and mortgage sectors.

The mortgage stress test, strong household balance sheets, and financial institutions working with borrowers to manage payment shock are all reasons the national mortgage renewal outlook shouldn’t spill into a crisis, according to Bank of Montreal (BMO) senior economist Robert Kavcic.

And Toronto mortgage brokers have also reported a calm outlook on mortgage renewals even despite plenty of borrowers renewing at higher rates.

CMHC sees delinquency pressures staying “elevated” throughout the year and said regional monitoring will be important – but also isn’t expecting Toronto’s condo market to deteriorate as strongly as it did just before the turn of the century.

“There are a lot of elements that are very different today than what we saw in the 1990s. And part of that is mortgage regulation,” Bourassa-Ochoa said. “The economy, as well, is a lot more diversified in the GTA today than it was in the 1990s.

“The risk is there, definitely, but when we try to compare it to another big economic downturn in history there are a lot of variables that are different and it suggests that it might not be leading to that extent.”

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Mortgage ‘cliff’ fears ease as TD sees gentler hill for borrowers

TD Economics argued that Canada’s widely feared mortgage renewal “cliff” has already looked more like a hill, with rising incomes and stretched amortizations cushioning borrowers and limiting the drag on consumer spending.

One worry hanging over the Canadian consumer has been that spending would be held back as mortgages originated at rock-bottom pandemic interest rates renew into higher prevailing rates over the coming quarters.

TD, citing Bank of Canada analysis, noted that 15% of outstanding mortgages would see payments increase in 2026, mostly five-year fixed loans, and that affected borrowers could see payments increase 20%, depending on whether they adjust their amortization length. 

Mortgage shock turned into gentler hill

“These figures might give readers pause, but there’s more going on beneath the surface that is expected to leave a much smaller mark on overall consumer spending,” TD Economics said.

“In particular, the debt service ratio for the economy is below its recent highs in 2023, suggesting the period for the worst risk has already past.”

“This lower debt servicing burden exists for two reasons: healthy income growth and longer amortizations,” the analysis said. “The average mortgage amortization has been rising since early 2021 and now sits about 16 months longer than before the pandemic.”

TD added that this helped “smooth the payment shock against rising interest rates in 2022 and 2023, though it was not the dominant driver.”

“The more important factor has been stronger growth in personal disposable income,” TD said, arguing this has “turned a mortgage ‘cliff’ into a much gentler ‘hill’.”

It estimated personal disposable income growth over the past three years ran roughly two percentage points faster than in the three years before the pandemic, and that otherwise the debt service ratio would have peaked about one percentage point higher.

“That income strength also helped to boost the savings rate moderately above trend, providing another cushion for Canadian consumers.”

TD expects “downward pressure on aggregate debt payments as lower policy rates gradually feed through to debt-servicing costs – a process that historically takes four to six quarters.”

Housing recovery delayed, not derailed

On housing, TD said “the market hasn’t turned yet.” Recent data showed “a weaker-than-expected first quarter for home sales and prices, especially in B.C. and Ontario,” leading the bank to trim its outlook.

“Canadian average home price growth is likely to be closer to 1% rather than the 4% expected in our December outlook,” it said – a marked downgrade that nonetheless implied “a gradual, modest recovery supported by pent-up demand.” 

“A strong rebound looks unlikely given multiple headwinds: elevated supply in key regions, slow population growth, softer labour markets, and still stretched (but improving) affordability in Ontario and B.C.,” TD said.

It expects conditions to improve in 2027 “in parallel with an improvement in the economy and affordability,” with modest population growth lending “a helping hand in 2028 or 2029.”

Supply is also projected to tighten as construction stays on the sidelines in over‑supplied pockets, including what TD called “the GTA condo market, which is famously the weakest market in the country.” 

“In terms of risks, economic underperformance poses a downside risk,” TD said, pointing to the potential for weaker employment to amplify renewal stress. “However, upside potential also exists if falling prices unleash the significant pent-up demand that exists within Ontario and B.C. faster than we expect.”

The bank noted Canada has “seen this before” when surging sales in 2023 and 2024 caught forecasters off‑guard.

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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.”

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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!