While the economy remains the biggest source of risk, there's no sign of a crisis for the mortgage market
A turbulent first half of the year for the economy has seen risk grow in Canada’s residential mortgage market, according to a new report by the national housing agency, although lenders appear in a good position to ride out that volatility.
Canada Mortgage and Housing Corporation (CMHC) said in the spring version of its Mortgage Industry Report, released today, that the overall economic outlook remains the “biggest source of risk” to the mortgage market because of how unemployment can lead to a jump in mortgage defaults.
US president Donald Trump’s tariff war plunged the Canadian economy into crisis at the start of the year and raised fears of mass layoffs and a sharp contraction, although reports this week suggested both the US and Canada are working towards a new trade deal.
The continuing uncertainty makes it difficult to assess current risks to the mortgage market, CMHC said, but it sounded a positive note on the ability of lenders to cope with a bumpy economy.
“Mortgage lenders entered 2025 in good financial health, which should help them handle the uncertainty,” the agency said. “In 2024, mortgage delinquency rates stayed near historic lows outside of the pandemic. However, high household debt and mortgage renewals at higher interest rates remain vulnerabilities for the Canadian economy.”
The national mortgage delinquency rate has continued to tick upwards, hitting 0.21% by the fourth quarter of last year – but that remains lower than the pre-pandemic level of 0.29% in 2019.
Ontario has been especially vulnerable to mortgage delinquencies, with Prince Edward Island and British Columbia also seeing noteworthy increases in sharp contrast to New Brunswick, Saskatchewan, and Alberta, which all saw delinquency rates fall despite remaining high.
A growing number of outstanding mortgages are also uninsured. Seventy-five percent (75%) of mortgages across the country didn’t have insurance last year, CMHC’s report showed, “[putting] lenders at greater risk of financial losses if mortgage delinquencies increase.”
#Mortgage lenders entered 2025 in good shape.
— CMHC (@CMHC_ca) June 12, 2025
Falling #InterestRates helped borrowers lower monthly payments — but longer amortizations persist.
Most borrowers still have enough equity to weather moderate house price drops.
Keep reading for the top #MortgageTrends. 👇
/1 pic.twitter.com/nJ0DdfSkLp
Renewal outlook remains calm despite rate fears
The looming wave of mortgages coming up for renewal in 2025 and 2026 – many at significantly higher borrowing costs than the original contract rate – drew plenty of headlines and sparked concern over homeowners’ potential inability to handle heavier payments.
But a series of rate cuts by the Bank of Canada last year appears to have brightened that renewal outlook, with little sign of widespread strain in the market as mortgages come up for renewal.
About 1.2 million fixed-rate mortgages this year and another million in 2026 are still due for renewal – but “these renewals will not face interest rates as high as those who renewed in 2024,” CMHC said.
Extended amortization periods proved a valuable way of helping borrowers avoid a huge payment shock at renewal time, the report indicated.
Meanwhile, those central bank rate cuts helped variable-rate mortgages became the most popular mortgage type at the beginning of the year, accounting for 42% of new mortgages in February.
Shorter-term mortgages – between three- and five-year contracts – also remained popular, making up 32% of the new mortgage market, as homebuyers and homeowners took a wait-and-see approach to the economic outlook in anticipation of possible lower rates down the line.
Last year was also a good one for alternative lenders, CMHC said, although their continued expansion of market share didn’t come without risks.
The country’s biggest alternative lenders saw higher growth than national mortgage credit in 2024 – but “these lenders’ risk profile has increased moderately due to higher delinquency rates, leading them to increase their loan loss allowance.”
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.
