Mortgage delinquencies are on the up across many parts of Canada, with Ontario emerging as one of the hardest-hit provinces in terms of missed payments and affordability strain.
But while that trend is expected to continue in the year ahead as more mortgages come up for renewal, experts have stopped short of predicting a huge escalation – and not many mortgage industry members expect arrears to spill into a crisis either.
That’s partly because of an often-repeated caveat to news of rising delinquencies: they remain below historical levels, and reasonably contained across the country.
And lenders’ willingness to work with their customers to identify solutions instead of watching them crash and burn will also likely play a part in limiting the damage, according to Rates.ca mortgage and real estate expert Victor Tran (pictured top).
“I think [delinquencies] will continue to increase as more homeowners renew their mortgages in the next 12 months, 24 months even. But I think it’s going to be a slow grind,” he told Canadian Mortgage Professional. “It’s not going to be a significant, drastic increase suddenly and I don’t think we’re going to see sudden mass foreclosures or power of sales.
“At the end of the day, the banks and lenders out there are in business to help homeowners out and lend them money, not to foreclose on homes.”
He pointed to a trend seen during the COVID-19 pandemic, when financial institutions stepped in with solutions for mortgage holders and other borrowers who had lost their jobs or seen payment strain.
That type of accommodation will likely play a role in the coming renewal wave, Tran said, as lenders offer ways for customers to navigate the challenges posed by higher rates and payments.
“We had payment deferrals of up to even six months, sometimes longer on exception,” he said. “So I think we’re going to continue to see that should any homeowner display financial distress and not [be able to] make mortgage payments.
“That will definitely keep the foreclosure and power of sale rates down. I think it’s going to keep down the delinquency rate as well. But I don’t think it’s a huge concern yet.”
Homeowners rolling with the punches on mortgage renewals
To date, the renewal wave has created challenging conditions for many borrowers, even if it hasn’t spiralled into a crisis yet.
Tran said he’s seeing renewing homeowners face an average monthly payment increase of between $400 and $500 a month – some more and some less, depending on the size of the loan – a not insignificant spike.
But few of those borrowers, he said, were caught completely unaware by the jump and most had a plan in place to deal with higher payments.
A recent report by Canada Mortgage and Housing Corporation (CMHC) highlighted that borrowers have proven resilient and usually sacrifice other expenditures before they fall behind on their mortgage.
That’s something Tran has seen, too. “This day was going to come. It was no surprise that the payments would be increasing sooner or later,” he said. “Even if some people do find it difficult to manage the higher mortgage payment, they start to cut other things too: less eating out, maybe one less vacation to offset some of the expenditures and allocate it towards a house instead.
“But I don’t see the number significantly jumping and mass foreclosures. I think for the most part, homeowners will be able to handle this.”
Rate relief brightens the picture for renewing borrowers
Another factor in homeowners’ favour now is the fact that interest rates have fallen significantly during the past two years, with both fixed and variable rates sliding compared with where they sat in 2024.
That means while borrowers are seeing their payments increase, the climb hasn’t been as bad as first feared when the Bank of Canada hiked interest rates in 2022 and 2023.
“Everyone is renewing to a higher rate and everyone’s facing higher payments, but certainly not as much as what was forecast a few years ago,” Tran reflected. “And I think the rates will probably hover around the same level for the next little while.
“There are definitely some bumps in the road with fixed rates – it went down, it went up – but for the most part, it’s been around the same as what we’ve seen now for the past 12 months. So I think it’s going to remain pretty flat and stable for the remainder of the year.”
CMP
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