Canada’s banks aren’t worried about mortgage arrears—but should they be? The arrears rate climbed again in August, according to the Canadian Bankers Association (CBA), which represents the country’s largest lenders. Investors have brushed off the rise as a return to normal after record lows. What they may not realize is that the late 1980s also saw a record low—followed by a long, painful climb. This time, it’s rising even faster.
Canadian Mortgage Arrears Rise To Highest Rate In Nearly 5 Years
Canadian mortgage arrears rate for the CBA’s largest member banks.
Source: CBA; Better Dwelling.
Canadian mortgage arrears continue to climb. The CBA reported the rate rose by 1 basis point (bp) in August to 0.24%, up 4 bps from last year and the highest since September 2020. The level remains low—but typically in finance it’s the velocity (or speed of change) that provides real insight.
Mortgage Arrears Rising The Fastest Since The Global Financial Crisis
It’s not the level of arrears that matters—it’s how fast they’re climbing. A high but stable rate means the scope of the problem is known, and it’s been mitigated. No surprises. A rising one signals an erosion, where we’re still learning the scope, extent, and cause of the problem. When it comes to risk, surprises are no beuno.
Canada’s arrears rate fell to a record low of 0.14% in mid-2022. By August 2025, it climbed to 0.24%—a 71% increase in under three years, marking the fastest rise since the global financial crisis.
That sounds alarming, but context matters. While the 2008 crisis disrupted global credit markets, it didn’t have a big impact on Canadian real estate. The market hadn’t become overextended like in the US, as major cities like Toronto were still in the process of a recovery in real terms from the last major downturn. We need to look further back.
Canadian Mortgage Arrears Mirror The ’90s—But Even Faster
Canada’s last major housing correction occurred shortly after the mortgage arrears rate fell to a record low of 0.18% in 1989. Over the next 91 months, the rate climbed to 0.65%—an 18.4% compound annual growth rate (CAGR). For context, a $100,000 investment growing at that pace would triple to $361,000 over the same period.
The current climb has persisted for 35 months, with arrears rising from 0.14% in mid-2022 to 0.24% in August 2025. That’s a 20.3% CAGR—over 10% faster than the ’90s. If the trend continues for the same length, the arrears rate would hit 0.57%, matching the rate in 1996. Climbing for that long may seem absurd—but prominent economists are warning investors that this correction will persist for years.
Foreclosures, however, may not follow the same path. In 1990, Ontario consolidated mortgage law to simplify the Power of Sale—a faster, cheaper alternative to foreclosure that allows lenders to sell a property without taking possession. While the remedy existed previously, the change further simplified it and helped to standardize it in mortgage contracts. Considering the recent explosion of use in Southern Ontario today, lenders may not be worried—but that isn’t very comforting for households, is it?
Did we ever figure out why the Big Six report much higher arrear rates than the CBA, even though the CBA’s members included are almost entirely them?
Good work as aways and great insight. Literally would never see this kind of explanation from another news org.
Banks would never answer this but I think it’s because the banks are reporting the uninsured mortgage rates, but high ratio loans are considered off balance sheet assets since the risk is outsourced to the insurer.
My guess is the CBA includes all mortgages–including the insured, but not insured in arrears since the risk is now CMHC/Genworth/etc.
What someone needs to answer is whether uninsured mortgages where the bank independently obtains insurance is considered on or off balance sheet risk. Punwasi made the point on X, as the CMHC has a payment schedule for *optional low ratio* mortgage insurance that lenders can take out without the borrower’s knowledge, moving the risk.
I’ve wondered about whether there’s some kind of wink-wink deal for taking on blanket appraisals. Like the developer mortgages that exploded with banks are only because the gov said it would securitize them, so any losses would be rolled into the opaque budget—but the profits flow to the bank.
The biggest takeaway from all this is the arrears rate may be worse, but never better. A problem any Canadian gov would hide from us until it’s a critical failure where we’re stuck with the bill. Not just a Liberal issue, but remember when Harper’s government hid the risk off balance sheet. We didn’t find out it was hidden until 10 years later, and still have no idea what it cost us. But we sure as heck had to pay for it!
USA real estate is reeling in investors from around the world every minute 24/7/364.
Kiss Canada’s real estate markets good bye for decades ahead.