Canadian Mortgage Arrears Stay Low, but Experts Caution on Job-Market Risks

Ottawa | 04 Nov 2025, 09:45 EST —
Canada’s mortgage-delinquency rate remains the envy of most developed nations — just 0.24 % of home loans were in arrears as of August 2025, according to new data from the Canadian Bankers Association (CBA). But while the figure signals remarkable stability, analysts warn that a softening labour market and the approaching 2026 renewal wave could challenge that resilience.

---

Arrears: a rare bright spot in household credit

For every 10,000 active mortgages in Canada, roughly 24 are three months or more behind on payments. In the U.S. and U.K., the comparable figure is between 60 and 90. Canadian lenders and regulators often cite this as proof that underwriting standards — income verification, stress testing, and loan-to-value caps — have worked as intended.

According to CBA, the low arrears rate reflects both strong household discipline and lenders’ flexibility. During the pandemic, banks offered deferrals and repayment adjustments that helped borrowers avoid default. Even after those programs ended, most Canadians resumed regular payments without incident.

Yet some cracks are forming. Credit-card balances and unsecured-loan delinquencies have begun creeping up since mid-2025. Economists note that non-mortgage debt stress typically shows up first, followed months later by mortgage arrears.

---

Regional patterns and early warning signs

Provincially, Alberta and Newfoundland & Labrador continue to report slightly higher arrears, tied to volatile energy-sector employment. Meanwhile, Ontario and British Columbia, which carry the nation’s highest home-price-to-income ratios, show modest increases in “early-stage” missed payments — borrowers one month late but not yet classified as in arrears.

Housing-market cooling is also visible: sales volumes in major metros have declined, and listings are taking longer to clear. While prices remain stable overall, pockets of weakness could amplify borrower anxiety if job losses rise.

Economist Robert Kavcic (BMO Capital Markets) commented last week that “the story is still one of incredible resilience, but we’re probably looking at the bottom of the arrears cycle. From here, it’s hard to go lower.”

---

The labour-market connection

The biggest wild card is employment. Canada’s jobless rate has drifted from 5.7 % to 6.3 % over the past six months. Wage growth is cooling, and several provinces have reported slower hiring in construction, tech, and financial services.

Historically, every 0.5-percentage-point increase in unemployment adds roughly 0.05 points to mortgage-arrears rates within a year. That would translate to a move from 0.24 % to around 0.30 % — still modest, but enough to double the number of households in distress.

Lenders have begun pre-emptive outreach, encouraging at-risk borrowers to discuss restructuring before missing payments. Major banks report that 80 – 85 % of customers who seek help early avoid arrears entirely.

---

Why arrears matter beyond the numbers

Even if national arrears stay low, their direction sends a signal about household vulnerability. Rising delinquencies can tighten credit conditions and make regulators wary of further rate relief. They also influence bond investors who fund mortgage-backed securities — indirectly affecting fixed-rate pricing for future borrowers.

In short, the arrears rate is more than a statistic; it’s a stress thermometer for Canada’s mortgage system.

---

Practical guidance for homeowners

1. Track your job-income stability. If hours or contracts are fluctuating, build a three-month payment buffer now.
2. Know your lender’s hardship options. Most major banks offer term extensions or interest-only periods for short-term shocks.
3. Prioritise essential debts. Mortgage and utility payments should rank above revolving-credit obligations.
4. Communicate early. A proactive call to your lender can open restructuring choices unavailable once you’re in arrears.
5. Use budgeting tools. Small adjustments — switching variable to fixed, or trimming non-housing spending — can preserve breathing room.

---

Canada’s arrears rate proves that most borrowers are still coping admirably with higher rates. But as the employment picture softens and 2026 renewals approach, the real test will be whether that discipline holds under pressure.

For now, the message from both lenders and policymakers is clear: stay alert, stay communicative, and plan early. Low arrears today are not a guarantee of calm tomorrow.