Borrowers are coping with higher payments at renewal time, but the tariff wave could add job losses as a new potential risk
Canada’s mortgage market has shown its resilience through years of interest rate volatility and climbing borrowing costs, but the outbreak of the US-Canada trade war has thrown a new potential source of economic pain into the mix.
Plenty of borrowers are facing strain when they renew their mortgages at higher rates than they originally took out – but while delinquency rates have remained low, the new tariff onslaught from the US could imperil jobs and worsen the arrears outlook in specific markets, according to TransUnion Canada’s vice president of financial services research and consulting Matt Fabian.
Based on the company’s research when the Trump administration first introduced tariffs early last year, the levies aren’t likely to melt down the mortgage market anytime soon, but they could darken the picture considerably for borrowers in tariff-impacted industries.
“When the first round of tariffs was outlined, we did some analysis about six months later,” Fabian told Canadian Mortgage Professional. “And it didn’t materially raise risk or delinquency at a national level, but we certainly did see some regional spikes.
“In pockets of Ontario where it was heavily concentrated in auto manufacturing, because of the layoffs that happened there, about six months later we did see a little bit of an increase in delinquency.”
That would likely worsen a trend that TransUnion has already noted: lower-risk borrowers are continuing to access credit from a position of strength, but a separate segment is facing mounting pressure from elevated costs and debt loads.
“We’re seeing kind of a bifurcation in the market,” Fabian said. “Affordability pressures are clearly influencing consumer behaviour. We’ve seen mortgage growth slowing slightly, and we’re also seeing a slight trend towards smaller mortgages.”
The areas at most risk of mortgage strain from the trade war
Ontario and Quebec, according to Fabian, are the provinces likely to see the highest degree of strain if tariffs on Canadian goods targeting auto, steel, and aluminium sectors produce the kind of layoffs that ripple through to mortgage payments.
“Depending on how these tariffs roll out, those industries in Canada tend to be concentrated in certain regional markets in Ontario and Quebec,” he said. “We expect to see what we saw before: there’s going to be regional impacts. It may not affect the national number too much but certainly pockets of Ontario, pockets of Quebec, pockets of Alberta.”
There’s also a difference, he noted, between volatility and rate levels as a driver of mortgage strain. Rate spikes, and not simply high rates, tend to produce the biggest payment shocks.
“It’s the volatility that’s the biggest driver of risk,” he said. “As long as rates are kind of stable and they’re not spiking, it’s a lot easier for people to plan financially.”
Canadians are managing – but risks remain
Even without the chaos of the trade war, Fabian said the data from TransUnion’s Consumer Pulse report shows that Canadian households are coping, but not comfortable.
Most respondents say they’re keeping up with their debt payments, but their top listed concerns include interest rates, inflation, and broader economic uncertainty.
“There’s still this headwind hanging over Canadians,” he said. “If something were to happen, consumers in some segments are going to continue to struggle to adjust to higher housing costs and everyday expenses that remain elevated compared to pre-pandemic levels.”
For now, there’s little sign of a sizable hit to Canada’s mortgage market, and the renewal wave has been much less bruising than many feared when interest rates were much higher in 2023 and 2024.
Bank of Canada rate cuts improved the outlook somewhat for renewing borrowers, and there’s been no hint of a flood of delinquencies despite the unease.
But Canadian borrowers aren’t out of the woods yet, particularly with deep uncertainty over the likely length and severity of the trade war.
“I think right now things seem stable,” Fabian said, “but there are a lot of variables out there that can topple it.”
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