Canada’s mortgage arrears set to plateau before declining through 2027-28: Desjardins
Arrears sat at just 0.14% during the pandemic, artificially suppressed by income support programs, payment deferral options and rock-bottom borrowing costs. As that support faded and homeowners rolled onto renewal at today’s higher rates, monthly payments jumped for many, even as the Bank of Canada’s policy rate has eased back from its 2023 high.
Renewal wall hitting recent buyers hardest
Norman’s paper points to the so-called mortgage renewal wall as the primary driver of the uptick.
Borrowers who locked in ultra-low five-year fixed terms during 2020 and 2021 are now renewing into a materially different rate environment, and those with larger outstanding balances, concentrated among buyers in Ontario and British Columbia who purchased at pandemic-era peak prices, are absorbing the biggest payment shocks.
Ontario has seen the steepest deterioration of any province, moving from having the lowest arrears rate in the country to sitting above the national average. Desjardins found that arrears have climbed fastest among mortgage holders carrying high loan-to-income ratios, particularly recent originations in the Toronto market.
Investor-owned units are facing separate pressure, the report noted, as softer rental demand and falling asking rents, partly tied to shifts in federal immigration policy, squeeze the numbers for landlords covering higher carrying costs against weaker income.
