CMHC isn't sounding the alarm on the mortgage outlook, but its deputy chief economist flagged some 'warning signs' as Trump's tariff chaos continues
Mortgage delinquencies are on the rise across many Canadian markets, with the overall national arrears rate hitting 0.21% in the fourth quarter of last year compared with a record low of 0.14% in 2022.
That still represents a tiny amount of mortgages across the country in delinquency – but economic uncertainty and the threat posed to Canadian jobs by the US trade war make the growing trend a concerning one, according to Canada Mortgage and Housing Corporation (CMHC) deputy chief economist Aled ab Iorwerth (pictured top).
He told Canadian Mortgage Professional the agency’s latest residential mortgage industry report showed some ”warning signs” on the delinquency front as fears continue to mount about the potential impact of the US administration’s tariffs on the Canadian economy.
“We can handle [delinquencies] if the economy is going smoothly, but if there were a major increase in unemployment as a result of the international situation, that does make us a little bit concerned,” he said.
“We’re seeing troubling signs in some of the other credit segments where the delinquency rates are going up – credit cards, auto loans and so forth. And those can be an early warning indicator of other challenges to come. So it’s not a clean bill of health.”
Ontario saw a sizeable year-over-year jump in delinquencies, from 0.13% to 0.20%, while Prince Edward Island and British Columbia also registered increases – to 0.23% and 0.17% respectively.
Meanwhile, Canada’s jobless rate ticked up to 7.0% last month, while TD Bank chief economist Beata Caranci has said up to 100,000 more jobs could be at risk this year if the economy buckles under the weight of those tariffs.
Rising missed payments and shrinking credit demand in the first quarter of 2025 point to increasing financial strain among Canadian businesses, according to new data from Equifax Canada.https://t.co/yRUASNDV2h
— Canadian Mortgage Professional Magazine (@CMPmagazine) June 11, 2025
Mortgage renewals in the spotlight amid higher-rate environment
Economic strain could also cloud the outlook for mortgage renewals. A series of Bank of Canada interest rate cuts last year helped ease fears of a potential mortgage renewal “cliff” in 2025 in 2026, with scores of mortgages coming up for renewal at much higher rates than the original contract rate.
While there’s been no sign yet of a renewal crisis, ab Iorwerth said mounting job losses or a tightening labour market could also spill over into pain for homeowners when their mortgage comes up for renewal.
“Last year, we were worried that the economy might be too strong and so interest rates would be tight because of inflation, and that would lead to quite a lot of people having to renew at higher rates,” he said. “The challenge this year is that they may not be renewing at higher rates – but that’s because the economy is quite a bit weaker.
“It leads to the opposite problem for a lot of people: renewing is likely to be OK [even if] there will probably be some sort of hit if people took out their initial mortgage at really low rates during the pandemic – but still, this macroeconomic uncertainty is creating challenges. We’re not facing this renewal cliff, but it may not be for the right reason.”
How are borrowers coping with mortgage pain?
Unsurprisingly, CMHC’s report showed that borrowers have been increasingly turning to longer mortgage amortizations when facing pain at renewal time, a trend that ab Iorwerth said might be expected to continue if the economic storm clouds linger.
That includes taking shorter-term mortgages, a trend that’s emerged in recent years as borrowers lock in borrowing costs with an eye on potentially lower rates and a calmer economic climate somewhere down the road.
“I think everybody’s going to be exploring all sorts of alternatives to try and lessen the burden or reduce their interest bill,” ab Iorwerth said. “One of those is the longer amortization. The other part is that they seem to be moving away from the traditional five-year mortgage and towards a shorter-term duration, towards variable rates.
“This is a sign that people are expecting a relatively weak economy. There are a lot of these tactics that I think will be adopted to try and limit paying more for mortgage payments.”
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.
