Canada's national mortgage delinquency rate has seen its first decline in three years during the second quarter of 2025. However, this positive national trend masks growing financial stress in the country's most expensive housing markets, with Ontario and British Columbia experiencing a significant rise in missed mortgage payments.
Key Takeaways
- The national mortgage delinquency rate fell to 0.22% in Q2 2025.
- Ontario's delinquency rate rose to 0.23%, surpassing the national average for the first time since at least 2012, with a 44% year-over-year increase.
- Toronto saw a 60% surge in delinquencies, reaching 0.24%.
- British Columbia's delinquency rate increased from 0.16% to 0.19%.
- These regional increases indicate persistent "financial stress" in expensive markets, despite improvements in Atlantic Canada, Quebec, and the Prairies.
Mortgage Debt and Household Resilience
Canada's mortgage debt has reached $2.3 trillion, a 4.8% increase year-over-year, fueled by a recent uptick in residential sales and stable national prices. While household disposable income also rose by 4.6% in Q2, this was the slowest pace since 2023, reflecting weaker economic conditions and limited employment gains.
Despite high overall household debt, with a debt-to-disposable income ratio of 181.8%, the situation has stabilized. This ratio is an improvement from three years prior, suggesting households are more resilient to economic shocks than in 2022.
Shifting Mortgage Preferences
Borrowers are increasingly favoring fixed-rate mortgages, reversing a trend from the summer of 2024. Three-to-five-year fixed-rate mortgages are now the most popular choice, making up 43% of new mortgages in August. Fixed-rate mortgages with terms of five years or more accounted for 17% of new mortgages, remaining historically low despite recent gains.
Worsening Affordability Challenges
A report by the Fraser Institute highlights the severe housing affordability crisis across Ontario and Canada. In Ontario's largest cities, monthly mortgage payments for a typical home can consume between 50.4% (Ottawa-Gatineau) and 110.2% (Toronto) of the local median after-tax family income, even after a 20% down payment.
Nationwide, the proportion of median after-tax family income required for a typical mortgage payment has climbed from 29.9% in 2014 to 56.6% in 2023. By 2023, no Canadian city offered typical homes that were affordable for families earning the local median income without significant down payments or external financial aid. The down payment required for a typical home now takes 22 months of median after-tax family income, a 56% increase since 2014.
