Homeowners in Toronto and Vancouver are showing mounting signs of financial stress as mortgage arrears are expected to climb steadily through the year, according to a new report from the Canada Mortgage and Housing Corporation (CMHC).
In its latest housing market assessment, CMHC highlights Toronto as the most vulnerable major market in the country. The report, authored by Deputy Chief Economist Tania Bourassa-Ochoa, notes that delinquency risks in the Greater Toronto Area (GTA) are rising more sharply and persistently than elsewhere.
Since reaching historic lows in the wake of the pandemic, mortgage arrears in Toronto have more than quadrupled. While the overall arrears rate remains low by long-term standards, the upward trajectory is expected to continue over the next 12 months.
The pressures weighing on Toronto homeowners are complex and interconnected. Elevated household debt levels largely a byproduct of years of soaring home prices—are colliding with declining property values and sluggish resale activity. This combination makes it harder for homeowners to sell quickly or tap into home equity during financial strain.
Small-scale investors, who account for a significant share of activity in the GTA, are also under pressure. Rising carrying costs and softening rental rates have pushed many into negative cash flow positions. At the same time, a comparatively weaker labour market in the region limits households’ ability to absorb higher mortgage payments as loans renew at elevated interest rates.
Vancouver, while facing similar challenges, is experiencing a more moderate increase in arrears. CMHC describes the trend there as “steady but slower” than in Toronto. High debt levels and softer resale conditions are contributing to growing financial pressure, but the pace of deterioration is less severe.
Other major Canadian cities present a more mixed picture.
In Montreal, delinquency risk remains relatively stable. Financial stress in that market appears more closely tied to broader consumer credit pressures than to housing conditions, which remain comparatively tight.
Ottawa, Winnipeg, and Halifax are seeing modest increases in arrears linked to local economic factors and credit usage. Calgary faces moderate risk, while Edmonton is considered more vulnerable due to labour market sensitivities.
Nationally, mortgage arrears have been climbing consistently since late 2023, though they remain historically low compared to previous economic downturns. Bourassa-Ochoa described the financial strain as “very tangible,” noting that many households have adjusted their budgets carefully to stay current on payments.
Some borrowers have opted to extend their amortization periods to lower monthly payments, a strategy that provides short-term relief but increases total borrowing costs over time. Bourassa-Ochoa characterized this as a trade-off between immediate financial flexibility and long-term wealth accumulation.
More than 1.5 million Canadian households have already renewed their mortgages at higher interest rates, with another million expected to do so over the coming year. The resulting increase in monthly payments has reduced savings capacity, curtailed discretionary spending, and altered patterns of credit use.
Despite the mounting pressure, most Canadians have managed to remain resilient during mortgage renewals. However, the report underscores that rising unemployment has historically been closely linked to spikes in mortgage arrears.
“As long as income remains steady, most households are staying on track,” Bourassa-Ochoa noted. But she cautioned that without stable employment, even carefully managed budgets can unravel quickly.
The report suggests that while many homeowners have successfully navigated the immediate impact of higher rates, the coming year will test the durability of that resilience particularly in Toronto and Vancouver, where affordability challenges and debt burdens are most acute.
