2025 Canadian Residential Mortgage Market Outlook: Is Default Risk Manageable?

The Canada Mortgage and Housing Corporation recently warned that residential mortgage delinquencies began rising in early 2024, and there will be 1.2 million fixed-rate mortgages maturing in 2025 (more than 50% of which are uninsured), with 85% of these coming off of historically low interest rates. This commentary covers our expectations for the Canadian residential mortgage market next year.

Key Highlights
-- Canadian mortgage borrowers continue to exhibit resilience as they manage their payment shock from renewing their residential mortgages at materially higher interest rates.
-- Banks and credit unions remain well positioned with solid mortgage fundamentals, including prudent underwriting practices, low loan-to-value ratios and proper provisioning for credit losses.
-- A potentially balanced 2025 housing market could help maintain property values and reduce credit losses for lenders.

"We expect delinquency levels to increase further in 2025 in light of the upcoming debt maturity wall," said Jiani Wu, CFA, Vice President, North American Financial Institution Ratings. "However, mortgage default risks remain manageable and significant credit losses are unlikely for Canadian banks and credit unions in 2025."