Why the latest uptick isn't a huge immediate cause for wider mortgage market concern
A growing number of homeowners in Ontario are missing mortgage payments as borrowers face renewal at higher interest rates – but the fact that the current level of delinquencies remains low by historical standards means there’s no cause for alarm just yet, according to a prominent mortgage professional based in the province.
New Equifax data showed Ontario’s mortgage delinquency rate, meaning the percentage of homeowners who have not made a mortgage payment for more than 90 days, crept up to 0.22% in the fourth quarter of 2024 compared with 0.19% in Q3.
That’s also a significant jump over 2023’s fourth quarter, when the delinquency rate was 0.12%, and a much faster rise in delinquencies than other provinces such as Quebec and British Columbia.
Still, mortgage market watchers should take that growth with a pinch of salt, Outline Financial managing partner Joanna Lang (pictured top) told Canadian Mortgage Professional.
Ontario’s delinquency rate remains below the levels seen between Q3 2012 and the beginning of 2016, and Lang said the number of borrowers required to stress-test their mortgages even when rates were much lower suggested most would be equipped to handle higher borrowing costs upon renewal.
“The only ones that are reporting are the big banks – so we don’t know about 5% of the market, on certain types of B lending or private lending,” she said. “But in general terms, if you’re coming up for renewal now and got a mortgage at 2.2% you were qualifying at 5.4%, 5.5%. Five years later, you can renew this mortgage at around 4.2%, let’s say.
“But your payment is not doubling, and it’s five years later. You have a smaller balance because you paid that [mortgage] down with those low rates, your actual rate is still lower than what you qualified for, and most people now can go back and restructure it, re-amortize it.”
Still low overall, but mortgage delinquencies across Toronto at Canada's largest bank continue to rise sharply pic.twitter.com/jBiYD6keOK
— Ben Rabidoux (@BenRabidoux) February 27, 2025
Falling rates give borrowers reason for encouragement at renewal time
Interest rates shot higher in the early months of 2022 as the Bank of Canada’s war on inflation began – but they’ve tumbled since last year, with the central bank making six successive interest rate cuts and fixed rates also diving as economic uncertainty pummelled 10-year government bond yields.
That’s improved the outlook for consumers renewing their mortgage and eased worries of a so-called “renewal cliff”, although delinquencies remain a prominent concern for plenty of borrowers.
“Who is being hit, I think, is that percentage of people… that treat their home as a bank machine,” Lang said. “They would refi every so many years and then tack in all the debt under.
“Generally, if they bought within the last five years, their house price is probably flattish. But now they’ve racked up the debt and they can’t use the house as a bank machine because there’s no equity to do that. So I could see how those ones are in pain.”
What’s more, Canadians will generally prioritize their mortgage and keeping their home above all other outlays, meaning they’ll strive to meet those payment obligations even if it means dipping into savings or cutting back in other areas.
“An average person who is trying to balance their budget and their mortgage payment is going to go up by a certain amount – it’s going to hurt, but it’s going to hurt the vacation budget, the Starbucks budget, and all of that,” Lang said. “I think it’s still a very, very low number – but if you talk proportions of increase, it’s a very good headline.”
Still – mortgage delinquencies suggest financial troubles elsewhere
But households missing their mortgage payment for more than three months usually means they’ve been experiencing financial stress in other areas for a longer period, CMHC noted last year.
“If their financial situation persists or worsens, consumers may choose to sell some of their assets to keep up with their mortgage payments,” a national housing agency report said. “With prolonged financial stress, homeowners could exhaust their financial resources, leading to missed mortgage payments and mortgage arrears, putting them at high risk of default.”
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