Canada’s household credit landscape has held steady, but cracks are emerging at the edges as the country braces for a wave of mortgage renewal shocks in 2026, according to a new CIBC Capital Markets report.
While overall insolvency rates have stabilized at pre-pandemic levels, economist Benjamin Tal said the apparent calm masks a significant shift beneath the surface.
“The relative stability in the insolvency trajectory has been masking a significant substitution between rising proposals and falling bankruptcies,” Tal said.
He called this trend positive for lenders, since proposals tend to result in lower losses and higher recovery rates than bankruptcies.
Credit growth has slowed from the pandemic’s breakneck pace, now hovering around 4% year over year. But that growth is being driven less by new borrowers and more by larger average loan sizes — up 27% since 2019 and a striking 46% since early 2022.
Gen Z is leading the way in credit growth, though their share of total outstanding debt remains modest.
Despite a weakening labour market, credit utilization has stayed remarkably stable at 65%. Average credit scores remain well above 2019 levels, and the share of subprime borrowers, while rising, is still consistent with a balanced market. But Tal cautioned that “risk is at its usual place — at the margins.”
The 30+ day delinquency rate among subprime borrowers has climbed to 11.5%, “notably higher than pre-covid levels.”
Among renters, who make up the bulk of non-mortgage borrowers, the 90+ day delinquency rate is now 0.2 percentage points above pre-pandemic levels, a trend Tal doubted would reverse soon.
Mortgage holders are also feeling the strain. The 90+ day delinquency rate for homeowners has risen slightly above 2019 levels, driven more by job loss than payment shock so far.
However, Tal warned that the real test is coming: “We expect the share of borrowers facing payment shocks of more than 40% to reach 5%-6% of the mortgage portfolio — more than double the share seen in 2025.”
He said most of this impact would be felt in the second half of 2026, as borrowers who locked in ultra-low rates during the pandemic face renewal at much higher rates.
Still, Tal argued that the overall risk to the financial system remains contained.
“Our assessment that we are already very close to peak unemployment for the current cycle, along with a reasonable starting point and increased pre-emptive activity by lenders, suggests that future credit losses should be consistent or even better than what might be priced in by the market.”
CMP
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