Rising Mortgage Arrears Signal a Wider Risk Window for Canadian Investors
Every investment thesis needs a stress test, and Canada’s housing market just got one from its own national housing agency. The CMHC now expects mortgage arrears across the country to keep climbing through mid 2027, and the numbers are worth sitting with before anyone makes their next move on property.
The arrears rate at Canada’s banks reached 0.29% in July, up six basis points from a year earlier. That is the highest level since 2015 and more than double the record low recorded less than five years ago. The CMHC projects it will keep rising to 0.33% by February and hold there through June 2027, which would mark the highest arrears level since 2012. For investors, that is not a rounding error. It is a signal that credit stress is building in a market many still treat as resilient by default.
What catches my attention is where this stress is concentrated, and where it might be headed next. The forecast is driven almost entirely by a 58% surge in Ontario arrears, with slow sales, a softer job market, and an ongoing price correction cited as the main drivers. Ontario and British Columbia are the only two provinces ending the forecast period at a cycle high, and they are also the only provinces that have actually gone through a meaningful price correction since the 2022 slowdown.
That distinction matters. Every other province rode the low rate boom higher and remains close to record price levels, propped up less by fundamentals and more by market inefficiencies that have yet to unwind. Investors who have been comfortable allocating capital outside Ontario and BC on the assumption those markets are structurally different should treat that comfort with some skepticism.
Regions that largely resisted the correction have only just begun posting near record declines, which means Ontario’s current reality may simply be arriving late elsewhere.
That is the part of this forecast I would flag for anyone building a portfolio right now. If price corrections are only now starting to spread beyond Ontario and BC, then a CMHC model built mainly around Ontario’s trajectory may be understating the arrears picture nationally. For investors, this is a moment to revisit assumptions on leverage, rental coverage ratios, and exit timing in markets that have not yet repriced. Opportunity still exists in a softening cycle, but it rewards those who read the data early rather than those who wait for the correction to become obvious. Timing, as always, is the variable that separates a good deal from a costly one.
Source: Better Dwelling
