Canada’s major banks are facing rising borrower stress once again. New data from the Canadian Bankers Association (CBA) shows mortgage arrears have climbed to a 5 year high as of September. The increase comes at a time when the total number of mortgages is shrinking, meaning each delinquent borrower now carries more weight in the overall arrears rate.
Below, we break down what the latest numbers reveal and why experts say normalization may not be the full story.
Mortgage Arrears Are Rising Quickly Across Canada
The national mortgage arrears rate reached 0.24% in September, up 4 basis points from the same time last year. While the level itself isn’t unusually high by historical standards, the direction of movement is significant.
Arrears hit a record low in June 2022 when the rate fell to 0.14%. Since then, the trend has reversed sharply. Today’s level resembles the pre-pandemic norm, but some underlying data suggests this could be more than simple “normalization.”
Mortgage Arrears Have Surged 63% Since 2022
The number of mortgages that are 90 days or more behind on payments has surged dramatically.
- 12,040 mortgages were in arrears in September
- This is up 17.8% year over year
- And 63.2% higher than the June 2022 low
- It is the highest arrears volume since September 2020
Compared to 2019, arrears are now 5.6% higher, signaling that mortgage distress is building more quickly than most forecasts anticipated.
Even though the arrears rate is still relatively low, the actual number of struggling borrowers tells a different story. This disconnect highlights a growing risk: the shrinking pool of total mortgages.
Total Mortgage Volumes Have Dropped by 150,000 Since Peak
The CBA reported 4.97 million mortgages at member banks in September. That is:
- Down 1.0% (-49,200 mortgages) from last year
- Down 2.83% (-145,000 mortgages) from peak levels
Mortgage credit growth has been slowing for more than a year as higher interest rates and affordability challenges keep buyers on the sidelines.
A smaller total mortgage pool amplifies the arrears rate because each delinquency now makes up a bigger share of the total. In other words, the rising arrears rate isn’t just about more homeowners struggling. It is also about fewer mortgages overall.
A Sudden One Month Increase in Mortgage Counts, But Not a Trend Yet
One surprising detail in the September data: mortgage counts jumped by 32,000 month over month, the first increase after 14 consecutive months of declines.
This spike caught analysts’ attention, but it’s too early to suggest a reversal. Seasonal patterns can distort monthly movements, and broader credit data still shows a downtrend.
Unless this becomes a repeated pattern in 2026, the long-term trend remains unchanged: fewer mortgages and rising arrears.
What This Means for Canada’s Housing Market
The data largely suggests that mortgage stress is rising, even if arrears haven’t reached crisis levels. Three key themes are emerging:
1. Arrears are climbing steadily
Borrowers are feeling the pressure of higher rates, inflation, and income that hasn’t kept pace with housing costs.
2. The total mortgage pool is shrinking
This reduces liquidity and magnifies the impact of each delinquency.
3. Normalization may not be the full story
While arrears are returning to pre-pandemic levels, the speed and scale of the increase are unusual.
Banks and policymakers will be watching closely heading into 2026, especially as more homeowners renew into today’s higher interest rate environment.
source: https://betterdwelling.com/canadian-mortgage-arrears-climb-to-highest-since-2020/
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