In the first quarter of 2025, the Canadian economy didn’t implode. But it did show us, in detail, what a slow bleed looks like.
According to Equifax Canada’s latest Market Pulse report, household debt climbed to $2.55 trillion, while non-mortgage debt hit a national average of $21,859 per consumer. For a country already stretched thin by high housing costs, inflationary pressures, and rising unemployment, these are not just numbers – these are cracks beginning to show on the surface of Canada’s economy. Like a stone chip on the windshield of this economic machine, the cracks start with a small, well-defined core and radiate outward. In 2025, the centre of this pattern is starting in Toronto, where non-mortgage delinquencies saw their greatest increase:
Source: Equifax, Valery.ca
They signal a structural tension that is pulling the Canadian economy in two very different directions, one where cautious consumers are trying to pay down debt and hold the line, and another where younger borrowers and lower-income households are slipping further behind, with delinquencies highest in borrowers under the age of 35. The result is a widening debt divide with significant implications for the real estate market.
Source: Equifax, Valery.ca
Mortgage Market: Renewal Season or Reality Check?
Let’s start with the so-called “Great Renewal.” Mortgage originations surged 57.7% year-over-year, not because Canadians are buying homes in droves, but because many are being forced to renew pandemic-era mortgages in a less forgiving market. According to CMHC’s most recent mortgage consumer survey, 20% of those renewers used one credit facility to pay off another.
Ontario, Alberta, and BC led the refinancing rush, with 28% of borrowers switching lenders, a clear sign that homeowners are rate shopping with a vengeance. Nearly half moved between the Big Five banks, reflecting a battle among major lenders to retain customers in a tight-margin environment.
And yet, while refinancing may offer momentary relief, the fundamentals remain precarious. Affordability hasn’t improved meaningfully. The average loan size grew by 7.5%, even as monthly payments dropped marginally. On top of that, CMHC has 29% of renewers using one credit facility to pay off another.
Is there a silver lining? Maybe. First-time buyers could be back (activity was up 40% from Q1 2024) but they’re still walking into a minefield of high debt burdens and economic volatility, so urgency is limited among those returning from the sidelines.
A Tale of Two Borrowers
One of the most telling insights from the report isn’t about mortgages at all. On one side, we see consumers attempting to be fiscally responsible. Credit card spending fell by $107 per month per cardholder, reaching the lowest level since March 2022. This isn’t necessarily a bad sign. It may reflect more prudent behaviour in the face of economic uncertainty – similar to the historic trend we see of Canadians padding their savings ahead of economic uncertainty.
Source: Statcan, Valery.ca
But if you flip the coin, you’ll find a different story. Payment rates are falling, especially among younger Canadians. The under-35 group saw their average credit card pay rate drop by 392 basis points, while the number of people making minimum payments rose. It appears young credit consumers are feeling more pressure than prudence. Similarly, auto loan delinquency among younger borrowers rose 30%, and credit card delinquencies surged 21.7% in the same group.
Ontario: The Epicentre of Stress
If the national data tells a story of strain, Ontario writes it in bold. The province experienced the sharpest spike in delinquency rates across both mortgage and non-mortgage products.
Mortgage holders in Ontario saw their 90+ day delinquency rate climb by 71.5%, while non-mortgage delinquencies jumped 24% year-over-year. Stack this on top of Ontario’s ever-climbing unemployment rate and weakening job market, and we’ve got the makings of an isolated recession beginning in Canada’s most populous province. If that’s not a canary in the coal mine for financial stress, what is?
The situation is particularly alarming when you realize Ontario also leads the country in home prices, property taxes, and cost of living. If the province most emblematic of Canada’s housing ambitions is also becoming the poster child for household financial instability, we may have a deeper problem in Canada.
Why This Matters for Real Estate
The Canadian housing market doesn’t operate in a vacuum. It is tied at the hip to consumer confidence, borrowing capacity, and credit health. As more Canadians fall behind on payments, their ability to qualify for a mortgage or even stay current on an existing one erodes. This is further reflected in CMHC’s mortgage consumer survey, where 70% of borrowers cited economic reasons as their primary concern over defaulting on a loan. On top of this, 46% were concerned about less money coming in from job loss, and 24% were concerned that debt problems (such as defaulting on another loan, or having high household debt) could cause them to miss a mortgage payment.
We’re seeing the early signs already. While mortgage originations are up, much of this activity is driven by renewals and refinancing, not by new entrants. First-time buyer activity has increased, yes, but affordability remains a significant hurdle. At the same time, non-mortgage delinquencies and rising debt loads, especially among younger Canadians, point to a fragile financial foundation.
This matters because a debt-laden population is not a resilient one. And a fragile borrower base makes for a fragile housing market.
Equifax’s report ends on a cautiously optimistic note, highlighting reduced credit card usage and potential stabilization in some delinquency segments. But the road ahead is rocky.
Equifax warns of looming headwinds, i.e. rising unemployment and food prices, which may further strain already vulnerable households. In the face of such a forecast, perhaps it is time for many to batten their hatches... or at the very least, hold onto their windshields.
