The Canada Mortgage and Housing Corporation doesn't usually make headlines with their quarterly reports, but their latest projection has caught the attention of economists, real estate professionals, and homeowners across the country. Canada's mortgage delinquency rate—the percentage of homeowners who've fallen behind on their payments—has climbed to 0.22% as of early 2025, and the CMHC expects it to keep rising throughout the year.

That might sound like a small number, and in some ways it is. We're not talking about a crisis on the scale of the 2008 U.S. housing collapse. But context matters. Canada's mortgage delinquency rate has historically hovered around 0.15% to 0.19%, so this uptick represents a meaningful shift. And when you consider that roughly two million Canadian mortgages are up for renewal in 2025, the implications become clearer.

For homeowners who locked in rates at 2% or 3% during the pandemic, renewal means facing rates that are now sitting closer to 5% or 6%. That's not just an adjustment—it's a financial shock. A homeowner with a $500,000 mortgage could see their monthly payment jump by $800 or more. For families already stretched thin by inflation, rising grocery bills, and stagnant wages, that increase can be the difference between staying current and falling behind.

The CMHC's economists have pointed to several factors driving this trend. High household debt levels mean many Canadians are carrying mortgages, car loans, and credit card balances simultaneously. When interest rates rise, the cost of servicing all that debt goes up. Add in rising unemployment—Canada's jobless rate has been creeping upward, hitting 6.7% in recent months—and you have a recipe for financial strain.

Unemployment doesn't just affect the people who lose their jobs. It creates uncertainty that ripples through entire communities. When someone loses their income, mortgage payments are often the first thing to slip. And unlike credit card debt, which can be negotiated or consolidated, a mortgage is secured by your home. Fall too far behind, and you're looking at the possibility of foreclosure or a forced sale.

‍

The Toronto Condo Situation

Toronto's condo market offers a particularly stark example of these pressures. The city's mortgage delinquency rate has jumped to approximately 0.68%, more than triple the national average. That's not a typo. Condo owners in Toronto are struggling at rates we haven't seen in years.

Part of this is structural. Many Toronto condo buyers stretched themselves financially to get into the market during the boom years, when prices were climbing month after month and the fear of being priced out forever felt very real. They took on large mortgages relative to their incomes, banking on continued appreciation and stable employment. But the market has cooled considerably. Condo prices in Toronto have softened, and in some cases declined, leaving owners with less equity than they expected. Meanwhile, their carrying costs—mortgage payments, property taxes, condo fees, insurance—have all increased.

For investors who bought pre-construction condos as rental properties, the math has become especially challenging. Rental income often doesn't cover the full cost of ownership, particularly when mortgage rates have doubled or tripled since the purchase agreement was signed. Some investors are choosing to sell rather than continue subsidizing their properties, which adds to the inventory of available units and puts further downward pressure on prices.

The unemployment factor is significant here too. Toronto's job market, while still relatively strong compared to other Canadian cities, has seen layoffs in sectors like tech, finance, and real estate. When a condo owner loses their job and doesn't have substantial savings to fall back on, they have limited options. Selling quickly in a soft market often means accepting a lower price, and if the sale price doesn't cover the outstanding mortgage balance, the owner is left with debt and no asset.

‍

What This Means for the Broader Market

Rising delinquencies don't just affect the homeowners who are struggling—they have broader implications for the housing market as a whole. When more properties come onto the market due to financial distress, whether through voluntary sales or foreclosures, it increases supply. In a market where demand has already softened due to affordability concerns and higher borrowing costs, additional supply can accelerate price declines.

This creates a feedback loop. Falling prices reduce homeowner equity, which makes it harder for people to sell without taking a loss. That can trap homeowners in properties they can no longer afford, forcing them to either find ways to increase their income, cut expenses elsewhere, or ultimately default.

For buyers, this environment presents both opportunities and risks. More inventory and softer prices can make homeownership more accessible, particularly for first-time buyers who have been waiting on the sidelines. But buying in a declining market requires careful consideration. Will prices continue to fall? Are you financially secure enough to weather potential job loss or income disruption? Can you afford the property at today's interest rates, not just the rates you hope will be available in a few years?

For sellers, the calculus is different. If you need to sell due to financial pressure, you may not have the luxury of waiting for market conditions to improve. But if you're selling by choice—perhaps downsizing or relocating—timing becomes crucial. Selling into a market with rising inventory and cautious buyers means you may need to price competitively and be prepared for longer days on market.

The CMHC's projection that delinquencies will continue rising through 2025 suggests we're not at the peak of this cycle yet. The full impact of higher interest rates takes time to work through the system, particularly as mortgages come up for renewal on a rolling basis. The homeowners renewing in the second half of 2025 will face the same challenges as those who renewed earlier in the year, and possibly worse if rates remain elevated or economic conditions deteriorate further.

‍

Moving Forward

None of this is meant to inspire panic. Canada's banking system is well-regulated, and our mortgage market has safeguards that didn't exist in other countries that experienced housing crises. Lenders are required to stress-test borrowers to ensure they can handle rate increases, and most Canadian mortgages are recourse loans, meaning lenders can pursue borrowers for deficiencies if a foreclosure sale doesn't cover the outstanding debt. This creates strong incentives for both lenders and borrowers to find solutions before reaching the point of foreclosure.

But it's also important to be realistic about the challenges ahead. If you're a homeowner facing renewal, start planning now. Look at your budget, understand what your new payment will be, and identify areas where you can cut expenses if needed. If you're already struggling, reach out to your lender before you miss payments. Many lenders offer hardship programs or payment deferrals for borrowers facing temporary financial difficulties.

If you're thinking about buying, do your homework. Understand not just what you can afford at today's rates, but what you could handle if rates stay high or go higher. Build in a buffer for unexpected expenses or income disruptions. And if you're selling, work with a real estate professional who understands current market conditions and can help you price and position your property effectively.

The housing market moves in cycles, and what we're experiencing now is part of that natural rhythm. Rising delinquencies are a signal that the market is adjusting after a period of unprecedented growth and historically low rates. For some, this adjustment will be painful. For others, it will create opportunities. The key is understanding where you fit in that picture and making decisions based on your specific circumstances, not on fear or speculation about what might happen next.