Ontario households are bearing the sharpest strain from Canada’s ongoing housing downturn. Analysts warn that families who borrowed heavily during the boom years are now squeezed by falling prices, higher borrowing costs, and tougher renewal conditions. The province’s unique combination of high leverage and steep valuations is amplifying stress in ways not seen as acutely in other regions of the country.

Leverage from the Boom Years

When home prices surged between 2020 and 2022, many Ontario buyers stretched their finances to enter the market. Ultra-low interest rates and fierce bidding wars encouraged households to take on record debt levels. Mortgages at five or six times income became increasingly common, particularly in Toronto and surrounding cities.

Movesmartly.com points out that this leverage made sense to buyers at the time, with expectations of continuous price appreciation. But the rapid shift in rates since 2022 has transformed those “affordable” mortgages into burdensome obligations. Monthly payments have risen sharply, leaving little margin for other expenses.

Fresh data from RBC shows that 90-day mortgage arrears in Toronto are now running well above the national average. While arrears across Canada remain relatively contained, Toronto’s outsized debt levels make it more sensitive to financial shocks. Rising arrears signal that stress is no longer theoretical; it is showing up in household budgets.

Mortgage brokers report a growing number of clients seeking extensions of amortizations or blended payment solutions just to stay afloat. In extreme cases, distressed sellers are appearing in segments of the market, offering properties below market value in hopes of avoiding foreclosure.

Why Ontario Is Hit Harder

Compared to provinces such as Alberta, Quebec, or even British Columbia, Ontario households leaned more heavily on debt to access real estate. Several factors make this downturn especially punishing:

Sky-high purchase prices: Toronto and Ottawa buyers entered at peak valuations, leaving less buffer as prices declined.
Smaller income cushion: Wage growth in Ontario has lagged debt growth, leaving households vulnerable when rates reset.
Concentration of investor activity: Multiple-property investors in Toronto and smaller Ontario cities added fuel to the boom; now, they face heavier financing costs and weaker rental yields.

This cocktail of vulnerabilities means Ontario’s correction has sharper edges than elsewhere.

The Downturn in Context

Ontario’s housing market is showing stress across multiple indicators:

Resale activity has fallen to some of the lowest levels in a decade, with buyers hesitant to commit.
Prices are down by double digits from their 2022 peak in many urban markets, eroding household equity.
Refinancing hurdles are growing, as lenders scrutinize income, debt ratios, and appraised values more aggressively.

The combination leaves homeowners in a tight spot: unable to refinance easily, yet burdened by rising monthly obligations.

Lessons from Over-Reliance on Housing Wealth

Experts say the current pain highlights the risk of relying too heavily on home values as financial security. For many years, Ontario households treated real estate appreciation as a guaranteed wealth builder. That assumption encouraged aggressive borrowing, often leaving little emergency buffer.

Even with safeguards like the mortgage stress test, many households purchased before these measures took full effect. As a result, some are only now experiencing the reality that housing markets can move both ways.

Policy Responses and Outlook

Economists argue that while further Bank of Canada rate cuts could ease pressure on variable-rate borrowers, they will not fully undo the leverage problem. The broader answer lies in income growth, diversified household finances, and a more balanced supply of housing.

Programs like the federal Build Canada Homes initiative may add affordable stock over time, but near-term relief is limited. Meanwhile, financial advisors are urging households to engage with lenders early, consider extended amortizations, or adjust spending priorities to preserve stability.

Looking Ahead

Ontario’s downturn is not expected to trigger a systemic housing collapse — national arrears remain modest, and most households still hold equity. But the province stands out as a case study in how leverage magnifies both booms and busts.

As one Toronto housing analyst summarized: “Ontario is learning the hard way that when debt levels run high, even a moderate downturn can feel severe.”

For many Ontario households, the adjustment is painful — a reminder that leverage powers growth on the way up, but sharpens the fall on the way down.