Canada’s banks are bracing themselves for the fallout from the real estate bubble. Last week, the CMHC warned that the share of mortgages in arrears will climb further—especially in Ontario. The banks seem to agree, as the data shows they’ve been preparing for a sharp increase in mortgage losses. The median allowance for mortgage losses has more than doubled over the past four years.
Canadian Banks Expect Mortgage Losses To Climb Sharply
Ratio of expected credit losses to total residential mortgage balances.
Source: CMHC; Better Dwelling.
Lenders need to be prepared for losses on bad loans. It doesn’t matter how much borrowers are vetted; the reality is some won’t be fully repaid. To account for this, lenders record an allowance for credit losses—an estimate of the money they do not expect to recover. It reflects expected losses, not just losses that have already occurred. Those expectations have risen sharply.
The CMHC compared each bank’s mortgage portfolio against its allowance for credit losses. The median—half of banks are better, half are worse—had an allowance equivalent to $149 per $100,000 in mortgages in Q2 2026, up 13.2% from a year earlier. That share has climbed 138.1% over the past 4 years, more than doubling. It has roughly tripled (+202.8%) since Q2 2019, back in the before times.
Keep in mind that these measure expected losses relative to mortgage balances. The banks are preparing for higher losses on each dollar lent, and they’ve lent a lot more dollars over that period. Their expectations of losses have grown alongside their mortgage portfolio over the past 7 years.
Canadian Mortgage Losses Expected To Rise Further At Some Banks
The median bank’s increase is sharp, but it hides a much sharper climb at some banks. The 75th percentile, the threshold for the top 25% of banks, saw allowances reach $337 per $100,000 in mortgages, up 47.9% from last year. The share is more than double (+126%) the median, and the highest in the data going back to 2015.
Canadian Mortgage Loss Expectations Grew At 3 In 4 Banks
Most banks expect higher mortgage losses, with roughly 3 in 4 reporting higher allowances than a year earlier. That share was just 53% a year prior, an already tenfold increase from the 5% recorded in Q2 2022. The share of banks reporting higher expected losses has gone from only 1 in 20 banks to 3 in 4 over just four years.
While the amount remains small relative to total mortgage debt, the increase is hard to ignore. Banks are preparing to lose more of each dollar lent, and more lenders expect losses to grow. That also only captures part of the rising pressure, with distress rising even faster among mortgage investment entities (MIEs).
