Residential Mortgage Industry Report Fall 2026 Edition

About the Residential Mortgage Industry Report

The Residential Mortgage Industry Report explores key issues in housing finance. Its purpose is to support stable and affordable housing markets. Focused on topics that impact policy and business decisions, the report provides clear insights and information to guide smarter, risk-based choices.

Mortgage borrower stress is rising unevenly

Mortgage delinquency is rising the most in Ontario and British Columbia

Mortgage arrears rates of 90 days or more have risen over the past few years in most regions. This aligns with CMHC’s mortgage consumer survey. This survey found that Canadians renewing their mortgage were more likely to report financial pressure from interest-rate changes (see Mortgage Term Choices in Canada: Interest Rate Risk).

However, delinquency rates remain below the historical peaks seen over the past 30 years. This suggests borrower stress is increasing but remains contained relative to past downturns.

The increase is not evenly distributed across Canada, suggesting region-specific stress rather than broad-based national deterioration (figure 1). Ontario is the key region to watch, with delinquency rates approaching levels last seen around 2008. British Columbia is also showing upward pressure. Alberta, by contrast, has continued to improve, supported by stronger regional economic conditions and higher energy prices.

Figure 2 shows that delinquency pressure is not only rising but is also becoming more geographically concentrated. The largest increases are clustered in Ontario census metropolitan areas (CMAs), with Vancouver also under pressure, while several Prairie markets have improved. Within Ontario, the increases were most noticeable in the Greater Toronto and Hamilton Area (GTHA) and Southwestern Ontario, where trade tensions are most strongly felt. This divergence highlights the importance of local economic conditions.

Weaker labour and housing market conditions are adding pressure

Rising unemployment and weaker labour market conditions are contributing to rising delinquencies, while softer housing market conditions in some parts of the country are limiting stressed borrowers’ options to sell or refinance. These pressures are most visible in certain markets and segments in Ontario and British Columbia, where softer home prices, stretched affordability and elevated investor activity have made some areas more sensitive to weaker demand and investor pullback. Ontario has also been more exposed to U.S. tariffs, adding to labour-market risk.

Non-mortgage delinquencies are an early warning signal

Financial pressure is also showing up in non-mortgage credit products. Delinquencies on auto loans, credit cards and lines of credit have continued to rise (figure 3). This matters because households typically prioritize mortgage payments over other debts. Rising non-mortgage delinquencies can therefore be an early signal that financial strain is building before it appears more fully in mortgage arrears (see CMHC analysis).

Delinquency rates increased across all 3 products in early 2026 for both mortgage holders and consumers without mortgages (figure 4). Mortgage holders continue to have lower delinquency rates on auto loans, lines of credit and credit cards, reflecting their stronger credit profiles. However, financial strain is now reaching borrowers who have historically been more resilient. Between the second quarter of 2025 and the second quarter of 2026, delinquency rates on lines of credit and credit cards increased proportionally faster among mortgage holders than among consumers without a mortgage.

Bankruptcy trends tell a similar story. The bankruptcy rate among mortgage holders has risen steadily since 2022, with a more noticeable increase over the past year (figure 5). The share of recent bankruptcy among mortgage holders remains below the share for consumers without a mortgage, but it’s rising faster. Between the second quarter of 2025 and the second quarter of 2026, it increased by 25% compared with 5% for consumers without a mortgage.

This narrowing gap suggests that financial pressure is reaching households that are usually better positioned to absorb shocks. The share of mortgage holders at high risk of bankruptcy has also continued to gradually increase in several Ontario regions, including Toronto, Windsor, London and Kitchener-Cambridge-Waterloo.

Credit risk is concentrated in existing mortgage portfolios, mortgage investment entities (MIEs) and the GTHA

Risk is building in existing mortgage portfolios

Since 2022, borrowers with credit scores below 600 have accounted for a growing share of outstanding mortgage balances, driving the deterioration in overall credit quality. By contrast, the share of new mortgage lending to borrowers in this credit score group has remained low and stable (figure 6). This suggests that the risk is building within existing portfolios rather than through new originations.

Credit risk is rising fastest among MIEs

The increase in credit risk also varies by lender type. Delinquency rates at chartered banks and credit unions have remained low and relatively stable over the past year. At MIEs, however, delinquency has risen sharply and continues to exceed that of every other lender type (figure 7). MIEs serve borrowers who may not qualify for traditional bank financing, including self-employed and credit-impaired borrowers. They also provide short-term and bridge financing for borrowers who are generally more financially vulnerable. This helps explain why stress is appearing earlier and more sharply among MIEs than among banks or credit unions. However, MIEs represent only a small part of the market, accounting for 1.8% of total outstanding mortgage balances as of the first quarter of 2026 (Residential Mortgage Industry Data Dashboard). Credit unions’ stronger performance may partly reflect their greater exposure to Quebec, where housing and labour-market conditions have remained comparatively stronger.

Within the MIE segment, risk is concentrated in Ontario, particularly in the GTHA. The share of MIE balances in arrears for 90 days or more rose from 3.0% in the third quarter of 2023 to 11.1% in the first quarter of 2026 in the GTHA, more than 3 times the rate in the rest of Canada (figure 8).

However, because the survey data distinguish only between the GTHA and the rest of Canada, they do not allow separate analysis of trends in British Columbia or Southwestern Ontario. Nevertheless, the increase suggests that delinquent loans remain in arrears for longer, rather than reflecting only a rise in new delinquencies. This points to growing difficulty in resolving problem loans in the GTHA, with CMHC’s analysis highlighting 3 factors that help explain why:

1. Interest-only lending is more common in the GTHA than elsewhere. Because these loans do not reduce principal over time, borrowers build less equity through repayment and have less protection if home prices fall. As of the first quarter of 2026, interest-only loans accounted for 69.7% of GTHA MIE balances, compared with 57.3% in the rest of Canada.
2. Borrower equity has become thinner. The share of uninsured GTHA MIE balances with a loan-to-value ratio above 80% increased sixfold, from 1.6% in the first quarter of 2024 to 9.2% in the first quarter of 2026. This likely reflects limited principal repayment on interest-only loans and falling home prices.
3. Debt burdens have risen sharply. Nearly one-third of GTHA MIE balances are now held by borrowers spending more than 60% of their income on debt payments.

Individually, these risks may be manageable. Together, they create a more fragile portfolio. More interest-only lending, thinner equity and heavier debt burdens reduce borrowers’ resilience if incomes weaken; payments rise or resale house prices fall. Although MIEs account for a small share of the mortgage market, GTHA MIE arrears could provide an early signal of broader mortgage market stress.

Current housing market conditions may make these vulnerabilities harder to manage. While attention has focused on Toronto condominium investors, according to CMHC market intelligence, highly leveraged households that purchased ground-oriented homes in suburban markets during the pandemic may also face pressure. This includes submarkets in the 905 area, such as Brampton and Oshawa. Higher mortgage carrying costs, softer home prices and weaker resale activity can limit borrowers’ ability to refinance or sell, reducing their options when repayment difficulties arise.

Source: Survey of Non-Bank Mortgage Lenders

The mortgage system is adjusting to higher risk

Borrowers are choosing more flexible mortgage terms

As rates have eased from their recent peak in June 2024, borrowers have shown renewed interest in variable-rate mortgages and fixed-rate mortgages with terms between 3 and 5 years (figure 9). Lower rates on these products compared with 5-year fixed mortgages may be contributing to this shift, as they can reduce borrowers’ mortgage payments.

These choices can allow borrowers to benefit sooner if rates fall, but they also leave them more exposed to future rate changes (see CMHC’s analysis of mortgage term choices).

Mortgage renewal pressures are easing

The largest renewal shock has likely passed, but renewal risk has not disappeared. Some borrowers will still face higher payments, particularly those renewing 5-year mortgages taken out in 2021 and, to a lesser extent, some 2022 cohorts. However, if current market conditions continue, more borrowers may renew at rates similar to, or below, their existing rates which should reduce renewal-related stress over the next few years.

Insured mortgage balances have stabilized as uninsured lending slows

Mortgage credit growth at chartered banks slowed sharply after 2022 as higher rates and weaker housing activity weighed on borrowing. In the second quarter of 2026, insured mortgage balances were stable after several years of decline (figure 10). The stabilization in insured mortgage balances may partly reflect expanded mortgage-insurance eligibility, which allowed more borrowers to qualify for insured mortgages. Uninsured mortgage balances continued to grow at a slower pace over the same period, but they nevertheless remain the main source of chartered-bank mortgage credit growth.

New mortgage lending also remained limited. Mortgage originations at chartered banks were essentially unchanged in the first half of 2026 compared with the same period in 2025, following 2 consecutive years of growth. Same-lender renewals rose sharply as mortgages originated during the pandemic reached maturity.

Banks’ expected credit losses point to the same cautious stance. Provisions for potential mortgage losses have gradually increased, signaling that banks expect more stress in existing portfolios. These provisions remain low relative to total mortgage balances, at under 1%, but they have risen steadily since 2022 to their highest level in more than a decade (figure 11). The spread across institutions has also widened, suggesting that some lenders are more exposed to riskier mortgage assets than others.

In the second quarter of 2026, 76% of banks reported higher expected losses than a year earlier (figure 12). This suggests caution is becoming more widespread among chartered banks, even though expected losses remain low overall.

Taken together, bank data points to a more conservative mortgage strategy. Insured mortgages are gaining some momentum after several years of decline. Uninsured mortgages remain the main source of mortgage credit growth, but their growth has been slowing. Banks are setting aside more provisions for potential losses in existing portfolios. This differs from the stress observed among MIEs, where higher arrears reflect more acute pressure in a smaller, higher-risk segment of the mortgage market.

New originations show a lower risk profile

The risk profile of new mortgage originations has improved in recent quarters. The share of newly originated uninsured mortgages with amortizations longer than 25 years has trended lower since 2025. Although the share remains elevated, the recent decline suggests that lower rates may have made shorter amortizations more manageable for some borrowers.

At the same time, fewer long-amortization uninsured originations may indicate that lenders and mortgage professionals are limiting higher-risk portfolios to reduce the overall risk profile of new lending.

Debt-service indicators point in the same direction. The shares of newly originated uninsured mortgages at chartered banks with elevated total debt service (TDS) ratios, including those above 45% and 60%, have declined since the second quarter of 2024. Combined with the decline in long-amortization originations, lower TDS ratios suggest that some risk indicators for new uninsured borrowers have improved. However, these trends capture only part of borrowers’ overall capacity to manage their mortgage payments and should not be interpreted as evidence that risk has disappeared.

What to watch next

Economic headwinds could keep borrower stress elevated

Mortgage borrowers are likely to face a challenging economic backdrop over the next year. CMHC’s Summer Update: 2026 Housing Market Outlook points to:

• slow economic growth
• trade and geopolitical uncertainty, and 
• subdued housing activity

These pressures will not affect all regions equally. Trade-exposed industries and weak resale market conditions could increase borrower vulnerability in Ontario. In markets where home prices are soft, borrowers under stress may also have fewer options to refinance or sell.

Delinquency pressure is expected to remain regionally uneven

CMHC analysis suggests mortgage delinquency rates will continue to rise in some regions through mid-2027 (figure 13). Given trade risks and weak housing market conditions, Ontario is expected to record the largest and most sustained increase. British Columbia and Atlantic Canada are expected to see more moderate upward pressure. Delinquencies are expected to remain broadly stable in the other provinces.

Toronto stands out as the CMA most exposed to further delinquency pressure. The economy will remain exposed to trade tensions in key manufacturing sectors such as the automotive industry in and around Toronto, affecting employment. Meanwhile, weak housing market conditions will persist and continue to make it harder for stressed borrowers to exit through a sale. These conditions position Toronto for persistent, above-average delinquency growth through late 2026 and into 2027.

The outlook reinforces the central message of this report: mortgage stress is likely to remain contained nationally, but concentrated regional pressures will require close monitoring.