Canada’s Mortgage Arrears Edge Higher: CIBC Warns of Early Cracks in Household Credit

Ottawa | 5-Nov-2025, 09:00  EST —

CIBC’s deputy chief economist Benjamin Tal has warned that Canada’s household-credit landscape is beginning to show signs of stress — even as overall mortgage arrears remain historically low. According to data compiled by the Canadian Bankers Association (CBA), the national arrears rate climbed to 0.24% in August 2025, the highest level in five years.

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The Big Picture

Tal’s analysis suggests that Canada’s household credit quality — long a source of macroeconomic resilience — is starting to fragment. While most borrowers are still meeting payments, a growing subset of households is becoming vulnerable due to a combination of high debt loads and rising non-mortgage obligations.

“The cracks we’re seeing aren’t a collapse,” Tal said, “but they’re the earliest indication that the next renewal cycle could stretch many borrowers to the edge.”

CIBC data indicate that consumer credit delinquencies — especially on auto loans and credit cards — are rising faster than mortgage arrears. This interconnected debt profile means that households carrying multiple liabilities could face liquidity pressure even before their mortgage resets.

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Why It Matters

• Mortgage arrears rising: At 0.24%, the figure is still low by international standards but marks a notable uptick from 0.16% last year. That translates to roughly 1 in 400 mortgages falling behind on payments.
• Higher renewal risks: Roughly 60% of Canadian mortgages will renew by end-2026. Even after the Bank of Canada’s rate cut to 2.25%, many borrowers will face renewal rates 2-3 percentage points higher than their original terms.
• Debt load problem: Average household debt now stands at 179% of disposable income, among the highest ratios in the OECD.
• Regional vulnerability: Prairie and Atlantic provinces have seen the fastest increase in arrears, linked to energy sector slowdowns and softer job markets.

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Who’s Most Exposed

Tal points to three risk groups: renters entering ownership through low-down-payment programs, sub-prime borrowers who locked into short terms in 2023, and homeowners carrying significant consumer credit balances. These segments are sensitive to even minor rate changes or income disruptions.

Financial-counselling firms have also reported a spike in clients seeking advice on refinancing and amortization extensions ahead of renewals. This suggests borrowers are proactively trying to avoid default risk — a positive sign for now.

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Economic Backdrop

The Bank of Canada’s recent rate cut has not yet flowed fully through to mortgage pricing. Variable rates hover around 5.25–5.50%, while five-year fixed mortgages sit near 5.35%. That means payment pressures remain high even as headline policy rates drop.

Meanwhile, inflation has eased to 2.3%, and unemployment edges up to 6.1%, highlighting a soft-landing scenario that isn’t immune to credit deterioration.

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Expert Take

Mortgage analyst Ron Butler notes that many borrowers with “trigger rates” — those whose monthly payments no longer cover interest — remain in extended amortizations with banks. That masking effect may keep arrears artificially low for now.

“The real story will unfold when banks begin to re-amortize loans back to standard terms,” Butler said.

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Borrower Takeaways

• Renew early: If your mortgage is up for renewal within 12–18 months, compare options now to lock a rate before further volatility.
• Watch your DTI: Keep debt-to-income ratio below 40%. Refinance high-interest credit if possible.
• Stress test your budget: Run payment scenarios at +200 bps to ensure affordability.
• Consider fixed terms: Stability may outweigh the small premium of fixed rates during uncertain times.

Canada’s mortgage market remains stable on the surface, but micro-cracks in household credit are appearing. The next 18 months — as renewals and higher DTI ratios collide — will test whether that stability holds.