The Ontario real estate downturn is expected to worsen. Mortgage arrears in the province are approaching 2008 levels, according to the CMHC. The risk is even further amplified in Greater Toronto, especially with private lenders. The agency warns Ontario’s sharpest and most persistent surge in arrears will persist through mid-2027.
Ontario’s Real Estate Boom and Bust
Ontario was the center of Canada’s real estate bubble and now it’s the center of its bust. The low rate frenzy sent prices 64% (+$393.6k) higher between April 2020 and March 2022. Since then, prices have dropped 26.7% (-$268.8k), reversing most gains—but not all. That little nugget is important when it comes to making sense of the arrears data we’ll get to soon. But first, let’s make sure we’re all on the same page when it comes to mortgage arrears.
The industry tends to frame rising arrears as a hard-hit consumer problem. In reality, households are hard hit during good times too. When someone can’t pay their mortgage, they typically try to sell. In a market boom, they sell pretty fast and feel like a genius when those profits flow in. When there’s a downturn, it takes longer to sell and not doing it fast enough means they end up in arrears. However, every property has a buyer—it’s a matter of price.
Would you rather go into arrears or lower your price? Obviously, the latter, which suggests those who don’t can’t actually do that. That’s mostly peak buyers, who in many cases see their equity wiped out entirely, and have to pay to sell. Ontario’s boom and bust is concentrated around investor-dominated Greater Toronto. CMHC doesn’t break down arrears by investors versus owner-occupiers, but the US housing crash provides some insight. Their downturn during the financial crisis is often blamed on overleveraged households, but the data shows it was an investor crash. Investors were just tapping subprime lenders to get more leverage.
Now that we have clear, let’s talk about arrears.
Ontario Mortgage Stress Builds, Private Lender Arrears Surge
Residential mortgage arrears rate at mortgage investment entities (MIEs): Greater Toronto and Hamilton Area (GTHA) vs Rest of Canada.
Source: CMHC; Better Dwelling.
Ontario has seen a surge in mortgage arrears. The arrears rate at CBA member banks hit 0.32% in Q2 2026, up 52% from a year before and over 5x the low in Q2 2022. The downturn is concentrated in the Greater Toronto and Hamilton Area (GTHA) and Southwestern Ontario, says the CMHC.
CBA data understates the scale of the problem since it excludes roughly 1 in 5 mortgages. As previously noted, banks tend to sell or not renew underperforming or riskier loans. Those borrowers often end up at mortgage investment entities (MIEs), along with a clientele that can’t obtain traditional financing. MIEs have seen the arrears rate explode around the GTHA from 3.0% in Q3 2023 to 11.1% in Q1 2026. These lenders represent only 1.8% of outstanding mortgage balances nationally, but their GTHA arrears rate is over three times the national rate.
“Although MIEs account for a small share of the mortgage market, GTHA MIE arrears could provide an early signal of broader mortgage market stress,” explains the CMHC.
Ontario Mortgage Arrears Forecast To Rise Through Mid-2027
Ontario CBA mortgage arrears rate and CMHC forecast.
Source: CBA; CMHC; Better Dwelling.
The worst is yet to come, according to the CMHC. Even after the renewal shock, the agency expects a further erosion in credit quality in the province. They warn that the arrears rate in Ontario is expected to climb through mid-2027, with Toronto being primarily exposed.
“Ontario is projected to record the largest and most sustained increase in mortgage arrears, concentrated in the Greater Toronto and Hamilton Area (GTHA) and Southwestern Ontario,” warns the CMHC.
Ontario isn’t alone in the potential worsening, but high prices and a concentration of trade tensions increase sensitivity. The agency specifically cites trade tensions threatening manufacturing employment, while weak resale conditions make it harder for stressed borrowers to exit.
