Canadian Households Show Resilience Despite Rising Mortgage Arrears: CIBC Report
Canadian household credit is holding up better than expected amid rising borrowing costs, though mortgage delinquencies continue to climb. fr.investing.com reported that total household debt grew at a near-record slow pace of about 4 percent, while CIBC Capital Markets economists Benjamin Tal and Katherine Judge pointed to stable credit utilization and limited early financial stress. This overall growth rate stood near the slowest pace ever recorded outside of distortions caused by the COVID-19 pandemic.
Mortgage Growth Hits 25 Year Low as Insolvencies Rise
Mortgage debt outstanding increased by approximately 2 percent year-over-year in August, marking its weakest growth in 25 years. This deceleration highlights a prolonged cooling in borrowing. At the same time, household insolvencies rose 6 percent year-over-year. CIBC characterized this upward movement as a return toward historical norms rather than an alarming deterioration. The insolvency rate is approaching its 2019 baseline. Consumer proposals accounted for 77 percent of insolvencies in the third quarter, compared to 60 percent in 2019. Consumer proposals typically trigger smaller loan losses than outright bankruptcies. Over the past year, however, the growth of credit lines accelerated, raising some concerns over emerging financial pressures.
Credit Scores Rise While Mortgage Payment Arrears Climb
Overall credit quality indicators remain encouraging. The average consumer credit score sat 1.3 percent higher than its 2019 level and 0.2 percent above the previous year. Borrowers with high-risk profiles showing 30-to-60-day payment delinquencies stood at a bit over 6 percent, slightly below the level of the previous year. The migration of late borrowers into more severe payment arrears also moderated compared to the peak seen in 2024.
Mortgage holders remain the primary source of financial vulnerability. The share of mortgage payments overdue by at least 90 days kept climbing as borrowers renewed loans at higher interest rates while labor market conditions softened. CIBC estimates that payment increases exceeding 40 percent affected 5 percent to 6 percent of the total mortgage portfolio in 2026. Conversely, non-mortgage borrowers experienced high delinquency rates that have stabilized over the past year. Credit card and line of credit holders showed positive trends, with severe delinquencies in both categories flattening out. CIBC views these indicators as important leading signals because borrowers frequently stop servicing other forms of debt prior to defaulting on their mortgages.
Outlook for Refinancing Pressures
CIBC expects refinancing pressures to ease significantly starting in February 2027, as payment increases upon renewal are projected to drop noticeably. Mortgage delinquencies could begin to recede over the course of 2027, although that timeline relies heavily on labor market developments. The bank cautioned that household financial strains could continue building over upcoming quarters, but indicated that the end of the mortgage rate repricing cycle, lenders’ preventive measures, and the prospect of a stabilizing or declining unemployment rate should help contain losses. Despite the rise in mortgage arrears, the economists concluded that the credit position of Canadian households is stronger than anticipated ahead of the wave of mortgage renewals, and they expect household credit losses over the coming year to stay manageable.