Your mortgage can easily be the most important bill you pay each month, which is why it's concerning when mortgage delinquencies are on the rise. And according to Equifax Canada, this was the case in Ontario in the fourth quarter of 2024, with some borrowers experiencing "severe financial distress."
While some Canadians are benefiting from lower interest rates, more and more are struggling under "mounting debt," Equifax said in their Q4 2024 Market Pulse Consumer Credit Trends Report, which shows that total consumer debt in Canada reached $2.56 trillion at the end of 2024, a 4.6% increase over 2023. The report, titled Stable versus Struggling: Canada’s Financial Divide Widens, highlights that the distress is focused in provinces like Ontario and BC, where cost of living is higher, with younger and lower-income individuals in those regions accruing the most debt.
"Homeowners in Ontario, in particular, are definitely experiencing some stress," Vice President of Advanced Analytics at Equifax Canada Rebecca Oakes tells STOREYS. "And then when you look at those non-homeowners — people who are renting, perhaps, or maybe don't have a mortgage — it's more the younger, lower-income people that are still experiencing quite significant financial stress. Versus, if you're a little bit older, little bit higher income, you tend to weather the storm a bit better because you maybe have more savings and a buffer to manage through."
According to the report, Ontario mortgage delinquencies were more than 50% higher than pre-pandemic levels in Q4 and over 11,000 mortgages missed a payment — nearly three times the number seen in 2022. In addition, Ontario's 90+ day mortgage balance delinquency rate (when a mortgage loan is 90 days or more past due) surged 90.2% year over year to 0.22%, and the 90+ day non-mortgage balance delinquency rate jumped 46.1% year over year.
In comparison, BC's 90+ day mortgage balance delinquency rate increased by a lesser 37.7%, followed by Quebec at 41.2%, the Atlantic provinces at 15.7%, Alberta at 3.6%, and the Prairies at 0.6%.
The other factoring widening the gap between those struggling and those coasting along is interest rates, and specifically how high they are now compared to when some homeowners locked in with their current term.
"What we're going to see this year is mortgages originating at much, much lower rates. Yes, interest rates are lower now, but the delta is still going to be 100 to 200 bps," says Oakes. "So I think that's what we're concerned about as we go into the rest of this year. There [are] a lot of renewals coming up around the middle to end of this year, and unless interest rates come down another percent or something, you're still going to have payment shocks in there for some consumers."
Those "some consumers" are among an estimated one million mortgage-holders whose terms are coming to an end in 2025 and will be renewing at much higher rates than when they signed on before or during the pandemic. Already in Q4 2024, a quarter of mortgage-holders saw their monthly payments increase by over $150 at renewal.
Now, Canadians are required to pass a number of checks, including the mortgage stress test, to ensure homebuyers can afford their mortgages even if interest rates rise, but Oakley cautions that a lot can change in five years (the most common mortgage term length).
"Consumers should be able to absorb some of that payment increase. What we need to remember, though, is five years is a long time, if that's your fixed-term period, and we've seen the cost of living rise significantly in that period," says Oakley "I think it's kind of a double whammy. Interest rates are higher and your day-to-day living costs are more expensive than they were five years ago, and so it might be that income hasn't kept up to the same degree."
Still many Ontarians and Canadians benefitted from lower interest rates over the fourth quarter. New mortgage originations rose 39% year over year, first-time homebuyers posted a 28.2% increase from the "extreme lows of purchases" in Q4 2023, and monthly payments have decreased 7.9% (or $200 lower) to an average loan amount of $2,330, finds the report. However, the average loan amount for first-time buyers remains 6.6% higher than it was in Q4 2023.
Heading into 2025, mortgage-holders could face the added stress of tariffs imposed by the US, even the threat of which could have adverse effects on the Canadian economy. Of course, homeowners could benefit from the Bank of Canada responding to tariffs with further interest rate cuts, but this silver lining would be accompanied by the very blows that necessitate it, such as decreased investment and job loss.
"I think tariffs, in general, could have quite a significant impact," says Oakley. "It's just a little bit early to know exactly what's going to happen with that, because it changes week by week at the moment."
