Shrinking headcount tests lenders’ growth plans as immigration caps take hold
Canada’s population downswing in the third quarter of 2025 landed squarely in the middle of the mortgage and housing story, amplifying questions about long-term demand just as policymakers tried to cool an overheated market.
Statistics Canada estimated the population at 41.58 million as of October 1, down roughly 76,000 people, or 0.2%, from July 1.
The drop followed almost a year of flat growth after the record expansion of 2022-23, when temporary residents helped push the population up by nearly 1.3 million in a single year.
“For a long time, Canada’s population growth has been driven by international migration,” Statistics Canada spokesperson Stacey Hallman said.
“Within the last three or four years, it was accounting for 95% to 99% of our population growth. That means it’s highly dependent on government policies, and within the last year, we’ve seen changes in those policies and we’re starting to see the impact of that on the population in the data.”
The number of non-permanent residents (NPRs) fell by about 176,000 in the quarter, including roughly 73,000 fewer study-permit holders, as more students and workers left the country than arrived.
StatCan said the third-quarter decline is the largest drop in non-permanent residents since comparable records began in 1971.
TD Economics highlighted how an immigration slowdown “cools Canada’s rental market” even as affordability remained strained. An RBC analysis, meanwhile, said new immigration rules were likely “to cool housing demand,” with fewer temporary residents expected to soften demand for rentals and entry-level homes, even as some were fast-tracked to permanent status.
Bank of Montreal (BMO) senior economist Sal Guatieri said during a conference this year that lower immigration “will be a bit of a dampener on consumer spending and, of course, the housing markets and rental markets for a little while.”
Every province and territory reported population decreases except Alberta and Nunavut, which each saw growth of 0.2%. Ontario posted the biggest third-quarter decrease at 0.4%, followed by British Columbia at 0.3%.
Rental market, construction and productivity in focus
The federal government aims to cut the share of non-permanent residents from 7.3% of the population on July 1 to 5% by the end of 2027, with third-quarter estimates putting the figure at 6.8% after the latest outflows.
That recalibration followed earlier moves to cap international students and rein in temporary foreign workers, and it came alongside mounting political pressure over housing availability and infrastructure strain.
“A major population adjustment is well underway and it remains one of the biggest economic stories in Canada,” Robert Kavcic, senior economist at Bank of Montreal, said in a note.
“In order to hit the non-permanent resident target share, we’ll need to see population growth run barely above zero through 2028, before settling back into a longer-term run rate of just under 1%.”
He said a “significant weakening” of the rental market, less pressure on services inflation, easing slack in the youth job market and a likely pickup in productivity and growth in real gross domestic product per capita are among the potential impacts he is tracking as temporary resident numbers fell.
According to a new Statistics Canada analysis, “large growth in the number of NPRs (as was seen from 2022 to 2024) was much more likely to influence the rental market than the ownership market of Canada’s housing system, given that NPRs tended not to be homeowners.”
For mortgage professionals, those macro shifts intersect with weakening new-build activity in key markets. A 2025 report on Ontario’s housing pipeline found that housing starts across 34 municipalities were down 34% compared with the 2021-24 average for the first nine months of the year, with ground-oriented starts down 43%.
Condo apartment starts were down 51%, while purpose-built rental starts were up 42%, partly cushioning employment losses in construction.
For lenders and brokers, the takeaway is not simply that fewer people meant weaker demand. Instead, a cooling rental and student segment, softer pre-sale and condo activity in Ontario and BC, and a relative bright spot in Alberta and parts of Atlantic Canada.
In that environment, originators who understand how immigration policy, construction pipelines and regional labour markets intersect with borrower demand are better positioned to navigate the next phase of Canada’s housing cycle.
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