Arrears are rising — but Canada’s mortgage wall is starting to crack
Those yet to renew originated at rates that were already starting to inch up in advance of the first rate increase by the Bank of Canada (BoC), which occurred in early 2022, meaning the payment shock at renewal will be comparatively more modest.
Leading indicators of credit stress also point to stabilisation. By late 2025, mortgage holders had begun reducing credit card utilisation, while the share of borrowers missing payments had plateaued, suggesting that household financial stress may have peaked.
The mortgage stress test further buffers the system, as most borrowers qualified at rates well above those they now face.
The five-year Government of Canada (GoC) bond yield — the benchmark that drives fixed mortgage rate pricing — has eased from its 2023 peak. If bond yields continue to moderate through 2026, borrowers renewing into shorter-term fixed products could see meaningful payment relief.
Risks that could shift the outlook
The Desjardins report is not without caveats. A resurgence in inflation could lead to higher interest rates, increasing borrowing costs and eroding affordability before incomes have time to catch up.
