Mortgage arrears keep rising, but CIBC economists see few cracks across the wider household credit picture
Canadian borrowers are absorbing the mortgage renewal shock better than most forecasters expected.
Credit scores are improving and early-stage delinquencies are easing, even as more homeowners fall seriously behind on their mortgages.
That is the conclusion of a new report from CIBC Capital Markets economists Benjamin Tal and Katherine Judge, who revisited household credit quality a year into the mortgage payment cliff.
Their verdict came two days before the Bank of Canada raised its overnight rate to 2.5%.
“Simply put, the credit quality position of Canadian households is surprising on the upside,” they wrote.
Mortgage arrears remain the weak spot
The exception is the mortgage book itself. The share of mortgages 90 or more days in arrears keeps climbing and now sits well above its pre-pandemic level, as borrowers renew at higher rates into a softer labour market.
CIBC estimates that payment jumps of more than 40% hit 5% to 6% of all outstanding mortgages in 2026.
Regionally, the strain is uneven, with mortgage arrears in Ontario expected to keep worsening until mid-2027.
“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,” Victor Tran, mortgage and real estate expert at Rates.ca, told Canadian Mortgage Professional earlier this year.
Still, serious delinquencies on credit cards and lines of credit held by mortgage borrowers have levelled off. Because most households stop paying those debts before missing a mortgage payment, CIBC treats them as an early warning, and that warning has gone quieter.
Derek Serra of Westboro Mortgage Investment Corporation says the Canadian housing market is still feeling the effects of pandemic-era low interest rates, as borrowers face higher renewal costs and affordability challenges. https://t.co/Dcwt1JphsT
— Canadian Mortgage Professional Magazine (@CMPmagazine) October 28, 2026
Proposals, not bankruptcies
Elsewhere, the numbers point to normalization rather than distress.
Household debt is growing at about 4%, near a record low outside the pandemic, and mortgage balances rose roughly 2% year over year in August, the weakest pace in 25 years. Average credit scores sit 1.3% above 2019 levels.
Insolvencies are up 6% over the year but are only now approaching 2019 levels.
Consumer proposals, which typically cost lenders less than bankruptcies, made up 77% of filings in the third quarter, compared with 60% in 2019. Equifax data on Canada’s insolvency hotspots suggests that choice is deliberate.
“A lot of the insolvency rates that we’re seeing an increase in is really tied to homeowners that want to protect their assets but obviously have a mountain of non-mortgage debt, and they’re trying to find a way to formally reduce that through more structured payments so that they can stay afloat,” Kathy Catsiliras, Equifax Canada’s vice-president of analytics and consulting, told CMP.
CIBC expects renewal payment increases to ease notably from February 2027, with mortgage delinquencies likely to trend lower that year, depending on the job market.
Until then, the Bank of Canada’s first rate hike since 2023 adds pressure where households are already stretched, according to Joel Fox, chief operating officer of Ownright.
“For most people, the 25 basis points on its own isn’t a dramatic change by any means. On a $500,000 mortgage, it’s roughly $60 to $70 more a month, depending on the amortization. The problem is that it can really affect households that have already been struggling,” Fox said.
“Plenty of people locked in at very low rates a few years ago, and they’re now renewing into a much bigger payment. This hike doesn’t help.”
His advice for borrowers nearing renewal: “If you’re renewing in the next year, start early. It’s a good idea to talk to your lender or broker, compare offers and know what your payment will be before the renewal notice shows up. Pick something you can live with instead of hoping and waiting for rates to fall.”
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