When Canada Mortgage and Housing Corporation published its regional forecast for mortgage delinquencies in February, it projected that the share of Toronto-area homeowners 90 days or more behind on a mortgage payment would climb from 0.26 per cent in the third quarter of 2025 to 0.34 per cent by the end of 2026, the sharpest deterioration among the nine major Canadian markets it tracked.
A note beneath the forecast set out the condition the projection rested on. CMHC built it, the agency wrote, “assuming policy rate decline by end of 2026.”
Seven months later, that decline has not arrived. The Bank of Canada held its target for the overnight rate at 2.25 per cent on Sept. 2, and has not cut since Oct. 29, 2025. Its next scheduled announcement is Oct. 28.
The borrowing costs that matter most to homeowners renewing a mortgage have moved in the opposite direction entirely. Canada’s five-year Government of Canada bond yield, the benchmark that fixed mortgage rates are priced against, rose roughly a quarter of a percentage point in the second week of September, according to Canadian Mortgage Trends. Several major banks responded by raising fixed rates 10 to 20 basis points.
“We’ve seen increases anywhere from like 20 basis points to almost 100 basis points with some lenders,” Clinton Wilkins of the Clinton Wilkins Mortgage Team told the publication on Sept. 12. “The pricing seems to be all over the place.”
Posted rate increases understate what some borrowers will pay, because lenders have also pulled back the discounts they negotiate case by case. “Not only has the base rate gone up, but some of the discretionary specials got removed, so the published rate changes 20 bps, but if you remove discretion, and some of those are 40 bps changes,” Ron Butler of Butler Mortgage told Canadian Mortgage Trends.
What the forecast assumed
CMHC’s analysis, published Feb. 5 by deputy chief economist Tania Bourassa-Ochoa and built on Equifax data, found that Toronto’s arrears rate had already more than quadrupled from its post-pandemic low, rising from 0.06 per cent in the third quarter of 2022 to 0.26 per cent three years later.
The agency attributed the acceleration to high household debt tied to high home prices, concentrated small-scale investor activity running negative cash flow as rents soften, falling prices and slower sales that make it harder to sell quickly or draw on equity, and a weaker labour market in the Greater Toronto Area than in other major census metropolitan areas.
The same forecast put Vancouver arrears rising from 0.18 per cent to 0.20 per cent over the projection period, Calgary from 0.16 per cent to 0.18 per cent and Edmonton from 0.29 per cent to 0.31 per cent. Edmonton carries the highest level of the group. Toronto has the steepest trajectory.
A million more renewals
More than 1.5 million households had already renewed at higher interest rates as of February, CMHC said, with roughly another million set to sign new terms over the following year. Higher payments, the agency wrote, have cut into savings, squeezed discretionary spending and changed how households manage credit.
The Bank of Canada’s reasons for standing pat have little to do with housing. CPI inflation has hovered near 3 per cent on persistently higher gasoline prices, while core measures stayed close to 2 per cent in July. The central bank cited the continuing Middle East conflict and newly announced U.S. tariffs and Canadian counter-measures in its September statement, and noted that financial conditions had tightened since July as long-term bond yields moved up globally, including in Canada.
The case against alarm
The figures involved remain small. Even at the top of CMHC’s forecast range, roughly one Toronto mortgage in 300 would be seriously delinquent, well below levels recorded in earlier downturns. The agency credits the mortgage stress test, introduced for insured mortgages in 2016 and uninsured mortgages in 2018, with keeping the increase gradual, and notes that most borrowers renewing have extended their amortization to hold monthly payments down.
The broader economy has also firmed. Real GDP rose 3.3 per cent in the second quarter after a very weak first quarter, the unemployment rate edged down to 6.4 per cent in July, and the Bank of Canada observed “some rebound in housing activity” following several weak quarters.
For borrowers facing a renewal in the next few months, the harder question is whether to lock in after the spike. David Larock of Integrated Mortgage Planners cautioned that the run-up in yields is being driven by geopolitical events that could reverse. “If you lock in a 5-year fixed rate today for five years, and the Strait of Hormuz reopens in a month, you’re stuck with that rate,” he said.
With some five-year fixed rates now roughly a full percentage point above comparable variable rates, according to Canadian Mortgage Trends, it would take several quarter-point increases from the Bank of Canada to close the gap. CMHC’s next set of regional arrears projections will be the first to be built on a rate path that no longer assumes relief.
Sources
Arrears forecast and renewal figures: CMHC, “Mortgage renewal wave strains some regions and borrowers,” Feb. 5, 2026. Policy rate, inflation, GDP and labour figures: Bank of Canada, Sept. 2, 2026 and Bank of Canada, Oct. 29, 2025. Bond yield move, lender repricing and broker comments: Canadian Mortgage Trends, Sept. 12, 2026.
