Mortgage Payment Deferrals Rise in Ontario and BC – A Warning Sign?

Mortgage payment deferrals are quietly climbing again in Canada, particularly in Ontario and British Columbia, according to new broker insights and regional lender data for Q2 2025. The trend, while not yet a crisis, is raising early red flags about borrower stress — especially among those who locked in during the ultra-low-rate years of 2020–2021 and are now facing renewal at nearly double the rates.

While national delinquency rates remain historically low, the rate of deferral requests has grown noticeably. In Ontario, deferrals rose to 2.9% of active mortgages in Q2, up from 1.6% at the start of the year. BC followed closely at 2.4%. Alberta and Atlantic Canada showed smaller increases, but the trend is consistent nationwide.

Why Are Homeowners Deferring?

Renewal shock is one of the top reasons cited. A household that secured a $600,000 mortgage in 2021 at 1.99% would have paid around $2,525 per month. At today’s average renewal rate of 5.59%, that same mortgage could now cost over $3,700/month — an increase of $1,200 or more. For many families, this sudden spike is unmanageable without restructuring or deferring.

Some borrowers are using deferrals as a stopgap while they seek refinancing, negotiate with lenders, or consider downsizing.

Who Is Most at Risk?

Experts warn that middle-class borrowers in suburban areas are being hit the hardest. These households often stretched to buy homes during the pandemic, taking advantage of cheap credit and higher qualifying power. Now, their budgets are being squeezed by higher mortgage payments, inflation, and increased property taxes.

Certain segments — such as variable-rate holders who reached their trigger points in 2023–24 — are also at elevated risk.

What This Means for Lenders and Borrowers

Banks and credit unions are closely watching these deferral numbers. While lenders are not yet tightening credit, some are beginning to pre-screen renewal clients more aggressively or offer proactive refinancing consultations.

Brokers advise homeowners to speak with professionals before deferring, as there are long-term implications. Missed payments can affect credit scores, future borrowing, and renewal terms. In some cases, a better solution might be extending amortization or refinancing with a more flexible lender.