In a new analysis published Thursday, the Canada Mortgage and Housing Corporation (CMHC) warns that financial pressures in these two cities are expected to drive mortgage arrears rates over the next six to 12 months to levels last seen in 2012 and 2015.

The report cites a cooling housing market and ongoing economic uncertainty as key factors contributing to the anticipated rise in delinquencies.

While arrears remain relatively low by historical standards nationally, CMHC says Toronto and Vancouver are facing unique challenges. With an abundance of listings and fewer buyers in these markets, many homeowners are left with limited options to sell and avoid falling into arrears.

“Toronto and Vancouver are in a completely different situation compared to other cities,” wrote Mathieu Laberge, Senior Vice-President of Housing Economics and Insights at CMHC. “We expect arrears rates in these markets to rise sharply in the next year, primarily due to a lack of market liquidity and increasing financial strain on homeowners.”

The agency’s analysis also pointed out that in cities with more balanced housing markets, such as Calgary, Saskatoon, and Halifax, mortgage arrears are expected to remain stable, with little change anticipated in the coming months.

Over 1 million mortgage renewals expected in 2025

However, the report stressed that despite the general resilience of Canadian homeowners, the full effects of rising interest rates and inflation may not be fully felt until later this year and into 2025, when many Canadians face the challenge of renewing their mortgages at higher rates.

CMHC forecasts that at least 1.05 million mortgage consumers will face renewal in 2025, and will likely see significantly higher interest rates compared to when they originally contracted their mortgages.

At the same time, the Canadian labour market is showing signs of strain, with weaker job growth and unemployment steadily rising. Canada’s unemployment rate currently sits at 6.5%, up a full percentage point over the past 12 months.

In a recent report, RBC economist Nathan Janzen argued that a weakening labour market actually presents the larger risk to Canadian households than the upcoming wave of mortgage renewals.

CMHC calls on industry to support struggling borrowers

As financial pressures increase, CMHC is urging the mortgage industry to support homeowners facing difficulties, particularly as mortgage renewals ramp up in 2025.

“As Canada’s Housing Agency, it is our responsibility to look forward with our eyes wide-open and encourage our peers from the financial industry to continue supporting Canadians who may be struggling,” Laberge wrote.

For homeowners facing challenges meeting their mortgage obligations, CMHC recommends reaching out to a mortgage professional at the earliest sign of trouble.

“Your mortgage professional is there for the long haul. They want to establish and maintain a positive relationship with you,” the agency says, adding that lenders, too, are “equipped and ready to help you deal with the temporary financial setbacks that you may be facing.”

Those dealing with financial strain have several options to consider to preemptively address potential arrears or delinquency. These include:

• Mortgage payment deferral (many lenders offer this option), allowing homeowners to temporarily reduce or pause their payments for a set period.
• Extending the amortization, which can help by lowering your monthly payments during periods of financial difficulty.
• Adding any missed payments (arrears) to the mortgage balance and spreading the cost over the life of the mortgage.

Canada Mortgage and Housing Corporation CMHC consumer finance tips delinquencies Editor's pick financial stress Mathieu Laberge mortgage arrears Nathan Janzen renewals unemployment rate

Last modified: November 15, 2024