CMHC says Toronto’s mortgage arrears have more than quadrupled as renewal shocks hit highly leveraged buyers.
Toronto’s mortgage arrears have more than quadrupled from post‑pandemic lows – and the riskiest pockets are exactly where debt is highest and equity cushions are thinnest.
According to CMHC, this is a targeted credit story, not a national meltdown.
Canadian homeowners are moving through a major mortgage renewal wave. More than 1.5m households have already renewed at higher rates, with another 1m due to sign new terms within a year.
CMHC says that higher payments are visibly squeezing savings, discretionary spending and credit behaviour.
However, the national mortgage arrears rate – borrowers 90+ days behind – has only risen by 7 bps between 2023 Q3 and 2025 Q3 and remains low by historical standards.
CMHC frames this as “2 distinct financial realities”: rising strain in certain segments, continued resilience overall.
CMHC’s modelling, using Equifax, Statistics Canada and Bank of Canada data, shows mortgage arrears rates rising moderately nationwide from late 2025 to late 2026, with clear outliers.
Toronto faces the strongest and most persistent increase in delinquency risk; Vancouver shows a moderate but steady rise.
In Toronto, arrears have more than quadrupled from post‑pandemic lows, although they still sit at low levels in absolute terms.
CMHC ties the acceleration to four linked forces on top of rate resets:
- high household debt from elevated prices
- concentrated “mom‑and‑pop” investor exposure facing rising carrying costs and softer rents
- falling prices and slower sales that weaken the exit option
- a weaker labour market in the GTA than in other major CMAs
Delinquency pressure there is expected to stay elevated through 2026.
In Vancouver, high debt levels and softening resale market liquidity are pushing arrears higher, but at a slower pace than Toronto.
Montréal’s delinquency risk remains stable and driven more by consumer credit stress than housing.
Calgary faces moderate risk; Edmonton is more vulnerable because of labour‑market sensitivity.
Ottawa, Winnipeg and Halifax show smaller arrears increases shaped by local credit use and economic conditions.
CMHC stresses that the arrears story is as much about borrower type as geography.
The main risk factors are: highly leveraged homebuyers, first‑time and other recent buyers with limited equity, and households that bought at peak prices and historically low rates – effectively pandemic‑era buyers in expensive markets.
CMHC calls pandemic‑period first‑time buyers in high‑priced regions “especially vulnerable.”
Their first renewals combine sharply higher rates with already large debts, which places significant strain on household budgets.
Interestingly, people who bought during 2020–2021 or between 2022 and 2024 are still going into arrears less often than the average homeowner. But arrears within these cohorts are rising faster than in the rest of the market, underlining their sensitivity to the current rate environment.
CMHC reports that, since 2021, both the number of high‑risk borrowers and the amount of debt they hold have increased, with the fastest growth among those most likely to miss payments or face bankruptcy.
Since 2024, low‑credit‑score borrowers appear to have pulled back from new debt, likely reflecting tighter access to credit.
CMHC reads this as a return to pre‑pandemic risk levels and a signal that more households may now be stretched as they juggle higher rates and living costs.
Yet arrears remain below earlier peaks. CMHC credits four factors:
Borrower behaviour. Many households are, in CMHC’s words, “playing financial Tetris” – aggressively reshaping budgets and making sacrifices to stay current. Historically, arrears track unemployment, so stable income remains critical.
Amortization stretching. At renewal, most borrowers have extended amortization to reduce monthly payments.
That choice softens payment shocks but increases total interest and prolongs indebtedness, and it suggests a preference for short‑term liquidity over long‑term wealth accumulation as housing becomes less affordable.
Labour market mix. CMHC notes that recent unemployment increases have concentrated among younger workers and recent immigrants, who are typically not yet homeowners.
Regulation. Since the global financial crisis, Ottawa has tightened mortgage rules, most notably through the stress test, introduced in 2016 for insured mortgages and 2018 for uninsured mortgages.
By forcing borrowers to qualify at higher test rates, the framework has helped ensure they could handle rate increases, and CMHC argues that this is why arrears have “risen gradually rather than sharply” despite rate shocks.
CMHC still calls the stress test “not bulletproof,” pointing to Toronto and, to a lesser extent, Vancouver as places where vulnerabilities are increasingly visible.
Looking ahead, CMHC says the resilience borrowers have shown through past shocks is being tested, but it believes Canada’s financial system still rests on “strong foundations.”
It calls for close regional monitoring to spot emerging pressure points and to direct targeted support to the borrower groups under the most strain as the renewal wave continues through 2026.
