The crisis is especially acute in urban centres like Toronto, Vancouver, and Montreal, where youth populations are highest
Canada’s youth unemployment rate hovered at 14.5% in August 2025, slightly lower than July's level but still near the highest seen outside the pandemic since 2010.
Fewer jobs in retail, food, and accommodation—industries that usually hire young people—have become a major factor. The slowing economy from the trade war, more automation, and changing consumer habits are cutting positions in these sectors and making it harder for students and graduates to find work.
First-time buyers under pressure
The spike has prompted concern among mortgage professionals and housing analysts, who warn that the effects could ripple through the country’s housing and mortgage markets for years.
"Mortgage defaults continue to be highly correlated with unemployment and, to a lesser extent, house price decreases," DBRS explained. “As unemployment increases, more households could face a cash flow shortage that could lead to an increased number of mortgages in arrears.”
First-time homebuyers—a prominent cohort in Canada’s housing market—are feeling the pinch. A recent national survey by Wahi found that young Canadians feel much more pressure to buy a home than earlier generations did. Societal expectations are the primary source of this pressure for Gen Z (59%) and millennials (55%), a marked difference from Gen Xers (33%) and baby boomers (33%).
Leah Zlatkin, chief operating officer at Mortgage Outlet, told Canadian Mortgage Professional that buyers who used a cosigner to qualify—without help covering monthly payments—could be especially at risk as rates rise and budgets stay tight.
“I have had many first-time buyers who have come to me who have qualified with their parents cosigning for them,” she said. “They can get financing to go buy that $1.2 million house with a $900,000 mortgage, [or] that $1.5 million house with the million-dollar mortgage they need.
“But the reality is that for many of those buyers, when the parents aren’t actually going to pony up the cash to [make] those payments and they’re going with a variable rate mortgage, I would rather have an honest, upfront conversation with them about their finances and whether this makes sense for them than urge a client to put money down and buy that house right now when I don’t think it’s reasonable.”
Urban centres and policy responses
The impact is especially acute in urban centres like Toronto, Vancouver, and Montreal, where youth populations are highest. Research from TD Economics has shown that entering the workforce during periods of high unemployment can have long-term negative effects on earnings and wealth accumulation.
Mortgage lenders are already bracing for the fallout. "Those hoping to enter the housing market for the first time have been caught in the middle, unable to afford to buy, as they continue to rent at rates that are on par with mortgage carrying costs in many cities," a RE/MAX report stated.
Government and industry responses have so far been limited. While some programs target youth employment and affordable housing, experts say more comprehensive action is needed.
In April, the federal government announced a plan to build 3.87 million new homes by 2031. The plan includes $15 billion in loans for apartment construction and longer, 30-year mortgage terms to help ease the housing shortage.
Still, many young Canadians remain doubtful. An Easy Home Renovation survey found that 33% of Millennials and 36% of Gen Z blame the government for not fixing housing affordability. Others point to low incomes, higher interest rates, and increased immigration as reasons for the housing crunch.
