CMHC's deputy chief economist flags rising arrears and MIE stress even amid some encouraging news on renewal risks
First, the good news: the feared mortgage renewal wave still isn’t spilling into a national crisis in Canada, and may already have peaked.
Still, a widening pool of arrears in southern Ontario and mounting stress among mortgage investment entities (MIEs) remain cause for some concern, according to a new report by the national housing agency, as the mortgage market continues to navigate a stormy economy.
Ontario, and specifically Toronto, were the main drivers of an increase in the national 90-day delinquency rate in 2025’s fourth quarter, Canada Mortgage and Housing Corporation (CMHC) said in its latest residential mortgage industry reportv.
And speaking with Canadian Mortgage Professional, Aled ab Iorwerth (pictured top), CMHC’s deputy chief economist, said that continuing Toronto trend was worth keeping an eye on, even if the general picture was encouraging for the mortgage outlook.
“The overall system seems to be reasonably strong at the moment given everything that’s happened,” he said. “But there are these pockets of concern.”
It’s not clear how much of that crisis has been worsened by the condo market meltdown in Toronto, an ongoing fiasco that’s seen demand plunge and values nosedive in that sector since 2022 – creating appraisal and cashflow nightmares for buyers and owners in the space.
Also noteworthy, according to ab Iorwerth, is the fact that MIEs, MICs (mortgage investment corporations) and other non-bank lenders have seen that 90-plus-day delinquency rate rise faster than chartered banks and credit unions.
“Their arrears rates are historically quite a bit higher,” he said. “They are a small part of the overall lending system. But that’s where we’re keeping an eye on – particularly if some of those lenders are involved in financing new construction.”
Delinquencies climb, but remain low by historical standards
The headline figures in rising delinquency rates are stark. Toronto saw a 45% year-over-year increase in the fourth quarter, while Barrie and Windsor posted growth above that range and Ontario as a whole saw delinquencies jump by 35%.
In Vancouver, delinquencies ticked 31% higher, with the province of British Columbia generating a 24% yearly upswing.
However, ab Iorwerth emphasized that the national market still appears far from the crisis some feared as the mortgage renewal wave – a flurry of Canadians renewing their mortgages at much higher interest rates than they first took out – approached.
It looked for a while like that renewal shock could prove overwhelming, especially after the Bank of Canada introduced a series of rate hikes in 2022 and 2023 in an effort to curb rampant inflation.
But the central bank has lowered rates since then, while fixed rates (which are influenced more heavily by bond market movements) are also lower than they were in the middle of 2023.
That economic softening has been driven in part by trade uncertainty with the United States, keeping the BoC’s overnight rate lower than earlier projections expected and providing modest relief to renewing borrowers.
“I think it’s a little bit of a silver lining of the international situation that interest rates, and hence mortgage rates, are a little bit lower than where we were forecasting,” ab Iorwerth said. “If the economy had been going gangbusters, the interest rates at which households would have been renewing their mortgages might have been quite a bit higher.”
Canadians’ rate sensitivity on the rise
A byproduct of the current market, though, is the reality that the sensitivity of Canadian households to interest rates has increased, according to ab Iorwerth – partly because of a wider move toward variable rates or shorter-term fixed-rate mortgages.
That means any unexpected rise in borrowing costs, whether driven by a resurgence in inflation, a trade shock, or instability in global oil markets, could transmit more quickly through the mortgage system than it might have a decade ago.
And with no end in sight to the ongoing US-Iran war – and last year’s trade turmoil barely easing – the economy’s storm clouds could linger for a while yet.
“The uncertainty level at the moment is extremely high,” ab Iorwerth said, “and it’s really difficult to predict the macro economy, for sure.”
Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by signing up for our free daily newsletter here.
