Early mortgage delinquency eased in Q2, but regulator data shows deeper arrears quietly building
Ontario credit unions grew assets and posted sharply stronger year-over-year profits in the second quarter of 2026, even as deeper loan arrears kept building, according to the latest Sector Outlook Report from the Financial Services Regulatory Authority of Ontario (FSRA).
Sector assets across the 48 institutions reached $106.47 billion at June 30, up 4.24% year over year.
Return on average assets (ROAA), the regulator’s core profitability measure, rose to 46 basis points from 30, as deposit costs fell faster than loan income.
One basis point equals 0.01%.
Credit union mortgage delinquency eases, but deeper arrears build
Residential mortgages remain the sector’s anchor. Credit unions held $57.92 billion in home loans at quarter-end, up 2.68% year over year, while commercial lending rose 1.97% to $27.44 billion.
The share of residential mortgages more than 30 days past due slipped to 1.13% from 1.15% in the first quarter, helping total 30-day delinquency record its first quarterly decline since the third quarter of 2024.
Year over year, though, mortgage delinquency was up 21 basis points, and commercial delinquency jumped 98 basis points to 2.80%.
The report’s tables point to strain further down the pipeline.
Loans more than 90 days delinquent rose to 1.08% of the total book from 0.99% in the first quarter and 0.71% a year earlier, while loan-loss allowances jumped 37.2% to $399 million.
Five of the 48 credit unions posted negative returns.
That mirrors the wider province, where Canada Mortgage and Housing Corporation (CMHC) expects Ontario mortgage arrears to keep worsening until mid-2027.
CMHC deputy chief economist Aled ab Iorwerth flagged the regional split in an October interview on trade-driven rate volatility and arrears.
“We’re watching arrears and delinquencies very closely. They’re particularly acute in Toronto, less so in Vancouver,” ab Iorwerth said.
“It’s just that they’re going up quite rapidly and it’s a source of concern. Maybe I should extend it beyond Toronto to include southern Ontario as well – but then you have places like Alberta where the economy remains strong and arrears and delinquencies remain contained.”
Jessica Rickerby, President of CMBA-ON, and Aled ab Iorwerth, Deputy Chief Economist at CMHC, warn that rising interest rates could further challenge housing affordability and prolong mortgage renewal pressures for Canadian borrowers. https://t.co/9P0c7D7qBi
— Canadian Mortgage Professional Magazine (@CMPmagazine) November 2, 2026
What does the FSRA outlook mean for broker files?
The quarter predates tighter policy: the Bank of Canada held at 2.25% through June, then raised its rate to 2.50% on October 28.
Credit unions enter that shift with liquidity up 45 basis points to 12.88% and borrowings down 25.25%.
Lenders in the broker channel are already sharpening scrutiny. Jamie Doolittle, head of BMO BrokerEdge, spoke on a MortgageFest Canada panel on prime lending in September.
“We are very focused on making sure that the story and the documentation and the numbers align,” she said.
“Having those conversations upfront and telling that clear and concise story is going to allow underwriters to make a decision faster.”
FSRA said it issued the first edition of its Enhanced Data Collection Supplemental Report in September, with the next edition expected in the first quarter of 2027.
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