Mortgage delinquencies in Ontario to keep rising until mid-2027, CMHC says

Mortgage arrears in Ontario are forecast to continue climbing until the middle of next year, according to Canada Mortgage and Housing Corporation. The national housing agency said British Columbia and Atlantic Canada will also see delinquencies rise, but at a slower pace. Its latest Residential Mortgage Industry Report found overall mortgage stress is increasing unevenly across regions. The agency said the risk to the national mortgage sector remains contained despite the regional pressures.

"Delinquency rates remain below the historical peaks seen over the past 30 years," the CMHC report said. "This suggests borrower stress is increasing but remains contained relative to past downturns." In Ontario, delinquency rates are approaching levels not seen since 2008. Alberta, however, is showing improvement due to stronger economic conditions and higher energy prices.

The strain is most evident among homeowners renewing their mortgages at significantly higher interest rates. A sluggish job market and rising unemployment have contributed to higher arrears, the report noted. Falling home prices have also eroded equity, limiting borrowers' options to sell or refinance. Ontario's exposure to U.S. tariffs has made the province particularly vulnerable during the current renewal wave.

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Mortgage investment entities, which are more exposed to higher-risk borrowers, are facing the greatest stress from rising arrears. These lenders represent about 1.8 percent of total outstanding mortgage balances, limiting wider risk to the sector. As the lending environment grows riskier, flexible mortgage terms are gaining popularity. "As rates have eased from their recent peak in June 2024, borrowers have shown renewed interest in variable-rate mortgages and fixed-rate mortgages with terms between three and five years," CMHC said.

The ongoing U.S. trade war, slower economic growth and a weak housing market are expected to increase pressure on borrowers, especially in Ontario. "The economy will remain exposed to trade tensions in key manufacturing sectors such as the automotive industry in and around Toronto, affecting employment," CMHC said. "Meanwhile, weak housing market conditions will persist and continue to make it harder for stressed borrowers to exit through a sale." The agency forecasts persistent, above-average delinquency growth for Toronto through late 2026 and into 2027.

With files from Mortgage Professional America