Canada’s largest mortgage lenders are in an unusually long-lasting rut. Canadian Bankers Association (CBA) data shows its members are seeing more mortgages fall into arrears in November. The arrears rate is now moving at one of the fastest paces ever recorded, rising from record lows to a 3-year high in a matter of months. At the same time, the bad luck for lenders keeps piling up—these same lenders have seen a rare contraction in total mortgages held, falling to a 3-year low despite massive borrowing stimulus.
Canadian Banks Saw Mortgages In Arrears Rise 22%
Canadian mortgage borrowers are increasingly falling behind on their mortgage payments. The number of mortgages in arrears climbed 22% to 10,480 in November, the most held by CBA members since March 2021. When isolated, the volume isn’t particularly concerning but the speed at which this shift occurred is. In just over two years, the volume surged 44% from the record low.
That might be concerning as a person but it won’t be to banks, at least for now. Since mortgage risk for the lender’s portfolio is based on a rate, those falling into arrears can be mitigated by simply growing the mortgage book. As long as more new mortgages are being written, it’s simply expressed as the cost of doing business.
Canadians Are Falling Behind On Mortgage Payments
The rate of mortgages in arrears held by large, federally regulated financial institutions in Canada.
Source: CBA; Better Dwelling.
The arrears rate remains relatively low, but even though it’s a small share—it’s clear the tides are turning. Annual growth came in at 4 basis points (bps) to push the arrears rate to 0.21% in November. The rate is up 7 bps since falling to a record low, which is a 50% increase over the two year span. Once again, the last time it was this high was back in Spring 2021—however this time, it’s heading in the wrong direction.
Canadian Banks Haven’t Held Fewer Mortgages Since 2021
A rare occurrence is also happening—Canadian banks have fewer mortgages. The CBA reported a total of 5.01 million mortgages held by its reporting members in November, shedding about 36.5k since last year. Annual growth has been negative since April 2023, which is an extremely rare occurrence in Canada. Prior to that, going all the way back to the mid-90s shows only 7 months in 2018/2019 where annual growth declined. These lenders are now holding the fewest mortgages since 2021.
Once again, by itself these numbers wouldn’t present much of a concern. They aren’t seeing historical highs, but they are climbing at one of the fastest paces in history. The fact this is occurring while policymakers are throwing enormous resources at the problem is also of concern. Compounding the issue is the shrinking mortgage market, despite the country going all out on trying to stimulate borrowing.
Canadians don’t realize all of the Big Six banks have a second-tier lender they work with that they can kick the risky stuff down to.
Since lenders can buy taxpayer backed loan insurance for any mortgage, you can tell who’s going to pick up the losses here. Banks get a “clean” book, second-tier lenders have no risk, now all that’s left is for you to find out some more details about the $60billion/year the gov decided is the right amount of mortgage debt for them to buy to “create liquidity” for lenders.
Sorry, not a pro so bare with me. How do we verify the gov’s loan book on this type of stuff? This sounds like an incredibly big issue that’s flying under the radar.
https://www.bankofcanada.ca/2025/02/securities-lending-of-the-governments-holdings-of-canada-mortgage-bonds/
The CMB holdings hyperlink is in the above URL.
Agree – the silence on the secondary market is deafening… there is no regulation at all on the MIC’s… many of them will be in a mess, all it needs it unemployment to tick up a bit more and the whole thing collapses like a house of cards it is.
Government set up a toxic mess with its 30 year mortgages. Now buyers with 20% down (like myself), need to wait until the market is clear or risk absorbing a blanket appraisal hiding an issue like these massive losses on properly appraised units.
i.e. article in the Globe this week shows pre-construction losses adding up to the regular price of a home. The person featured is down $600k from purchase price, which he presumably needs to find or they won’t be able to close.
https://www.theglobeandmail.com/business/article-toronto-buyers-left-in-lurch-as-preconstruction-condos-now-worth-less/
So funny. Exact same problem here. Professional holding off since 2021, and my husband and I can probably even pay in cash but they’re pulling all of this insanity that I don’t want to be one of the idiots who pulls the trigger just in time for reality to settle in.
Either home prices need to correct, the money goes to trash, or the market will be so distorted Canada can’t have a functional economy for decades. I see why people are leaving in mass waves now.
Same here, we can easily afford a house at even current ridiculous prices, but won’t move until we see a major correction of the order or 30-50 %… in the meantime we’ll rent and let the landlord take the loss
Same. No amount of demand-stimulating policy would make us jump in now.
You will be renting for the rest of your life then.
Or they’ll move and then Canada has a much bigger problem.
Canada is royally screwed if another country realizes the top talent would leave at the drop of a dime.
how is that different to “renting from the bank” then… ? and neither do I have repair and maintenance costs, property tax etc etc etc etc
My capital is earning 4 % in US $ CD”S and T-Bills… by the time 5 -10 years is up, I will be way ahead of any homeowner..
But do you actually think there will be a further correction of 30-50% from today’s prices? Not saying it isn’t possible but the economy would be crashed for years if that was the case. ON and the east coast already saw major corrections, BC/AB much less so. Late 2025 could be the lows for a while, depending on where you live…
Housing is a rotten,, corrupt and dysfunctional mess from top to bottom…
The average house price is still 8-10 times average earnings. The house price difference between the price, and what average working stiff people can actually afford is made of of fraud, money laundering, and mom and pop investors
These are all going to be tightened up considerably, loopholes will be getting closed, the FOMO is gone, investors are fleering, and no-one wants the C$… Likely the drug cartel money will still be flowing for a while
Like I said the best case for housing prices is 5-10 years stagnation, assuming incomes eventually catch up.. if they ever do…
With the level of uncertainty in the economy and never ending one disaster to another it’s no wonder new mortgages are on the decline. Ptsd from the plandemic , many borrowed more than they could afford thanks to BOC assuring rates would stay low for an extended period of time , a PM who said “interest rates are at historic lows GLEN” and a belief the budget would balance itself. Then pulled the rug like Lucy pulling the football on Charlie Brown. What could go wrong?
Don’t forget the stream of immigration drying up (prior to government announcements they would limit it), causing us to have to come to grips with whether (why) Toronto is(n’t) a world class city capable of attracting the world’s best and brightest when anyone who’s able is already fleeing Canada.
Too many listings all across Canada and about 1 sale for every 4 properties listed. All waiting for the spring market to get the price they want. Not going to happen.
Prices about to crater and lots of people will be well underwater and unwilling to pay. or cannot afford to pay. Takes a while to foreclose, so many will sit tight and save cash until turfed out. The banks then will have a choice, sell the properties off cheap and collapse the market or hold them off the market spend money on maintenance and taxes. Be interesting for a while.
how is that different to “renting from the bank” then… ? and neither do I have repair and maintenance costs, property tax etc etc etc etc
My capital is earning 4 % in US $ CD”S and T-Bills… by the time 5 -10 years is up, I will be way ahead of any homeowner..