The Big Six's Q3 results indicate a generally healthy borrower base and client profiles – and a sharp further market downturn appears unlikely
Canada’s mortgage market isn’t exactly floating in serene waters, with plenty of uncertainty surrounding the economy amid an ongoing tariff war and scores of homeowners still facing mortgage renewal at higher rates in the coming year.
But there’s little sign of a looming mortgage-induced meltdown at its six biggest banks, with last week’s third-quarter financials showing borrowers with those lenders are generally withstanding most of the tension straining at the economy.
Impaired provisions for credit losses – funds set aside for loans that are already behind – posted a modest quarter-over-quarter decrease among the Big Six lenders in Q3, suggesting continuing resilience among their clients.
That’s primarily because of the borrower profile those banks are able to serve, according to Morningstar DBRS senior vice president and sector lead, North American financial institution ratings Carl De Souza (pictured top).
“The way the Big Six have described that is the quality of their borrower base,” De Souza told Canadian Mortgage Professional. “If you look at their mortgage portfolios, they have really strong credit bureau scores. Loan to values [LTVs] are under 55%, which provides a lot of cushion if housing prices were to crash.”
While many major urban housing markets have contracted across the country, with prices and sales both dipping, De Souza said chances of a full-blown implosion look remote for now.
That’s partly because the pace of homebuilding is still mired well below the levels Canada Mortgage and Housing Corporation (CMHC), the national housing agency, says are required to restore affordability in the long-term.
“I always say, ‘What is the reality of housing prices crashing when we have a structural supply issue?’” Gomez said. “Right now, you’ll see that there are markets that are a little more under stress: Toronto and Vancouver.
“But there are still supply chain issues here. I think there is pent-up demand there. Prices have been coming down – but they haven’t fallen off a cliff. And I think that the banks have expressed that they’re quite comfortable at the current time with the quality of their portfolios and cautiously optimistic and pleased that there was a decrease, albeit modest, in impaired PCLs. That’s a positive sign.”
Modest recovery expected to arrive before long
Among economists at Canada’s top banks, none believe the national market is headed for a sharp and protracted further downturn, with activity likely to remain relatively sluggish now before a gradual rebound into 2026.
Royal Bank of Canada (RBC) assistant chief economist Robert Hogue said in a recent analysis the bank expects home resales to jump by 7.9% next year to a total of 504,100 units – although that recovery will be hindered by lower immigration targets and a still-weak labour market.
Next year is expected to see the RPS Home Price Index fall by 0.7%, reversing a projected gain of the same percentage this year, RBC said. But that’s a far cry from the steep declines that would precipitate a full-blown implosion.
TD even sees slightly brighter times ahead before the end of the year, and in June upgraded its home sales growth forecasts for the second half of the year across the country.
“This represents the assumption that pent-up demand that was sidelined in a weaker-than-expected first half returns to the market,” economist Rishi Sondhi wrote.
BMO’s Sal Guatieri says stubborn inflation makes a BoC rate cut unlikely this month, though easing could come in October. Trade tensions and a mixed economy add to uncertainty.
— Canadian Mortgage Professional Magazine (@CMPmagazine) September 3, 2025
Explore the full analysis on what’s ahead for rates and the economy.https://t.co/WzK5UCCizj
Banking giants calm for now even with hurdles ahead
The cautious optimism on display from top executives at Canada’s biggest banks after their earnings announcements last week, De Souza said, indicate a generally positive outlook for the future of Canada’s economy, even if challenges – including talks with the US on the trade war – lie ahead.
The banking giants’ next quarterly financial results may provide a more telling indication of how expectations are evolving leading into next year.
“It’s only one quarter,” De Souza said. “We don’t want to take one quarter as a trend. We’ll see how Q4 shapes out and how the negotiations will go. And then in Q4, the banks will provide their PCL outlooks for fiscal ’26 – and that’ll be very interesting to see.”
Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by signing up for our free daily newsletter here.
