Canada’s banks aren’t worried about mortgage arrears—but should they be? The arrears rate climbed again in August, according to the Canadian Bankers Association (CBA), which represents the country’s largest lenders. Investors have brushed off the rise as a return to normal after record lows. What they may not realize is that the late 1980s also saw a record low—followed by a long, painful climb. This time, it’s rising even faster.
Canadian Mortgage Arrears Rise To Highest Rate In Nearly 5 Years
Canadian mortgage arrears rate for the CBA’s largest member banks.
Source: CBA; Better Dwelling.
Canadian mortgage arrears continue to climb. The CBA reported the rate rose by 1 basis point (bp) in August to 0.24%, up 4 bps from last year and the highest since September 2020. The level remains low—but typically in finance it’s the velocity (or speed of change) that provides real insight.
Mortgage Arrears Rising The Fastest Since The Global Financial Crisis
It’s not the level of arrears that matters—it’s how fast they’re climbing. A high but stable rate means the scope of the problem is known, and it’s been mitigated. No surprises. A rising one signals an erosion, where we’re still learning the scope, extent, and cause of the problem. When it comes to risk, surprises are no beuno.
Canada’s arrears rate fell to a record low of 0.14% in mid-2022. By August 2025, it climbed to 0.24%—a 71% increase in under three years, marking the fastest rise since the global financial crisis.
That sounds alarming, but context matters. While the 2008 crisis disrupted global credit markets, it didn’t have a big impact on Canadian real estate. The market hadn’t become overextended like in the US, as major cities like Toronto were still in the process of a recovery in real terms from the last major downturn. We need to look further back.
Canadian Mortgage Arrears Mirror The ’90s—But Even Faster
Canada’s last major housing correction occurred shortly after the mortgage arrears rate fell to a record low of 0.18% in 1989. Over the next 91 months, the rate climbed to 0.65%—an 18.4% compound annual growth rate (CAGR). For context, a $100,000 investment growing at that pace would triple to $361,000 over the same period.
The current climb has persisted for 35 months, with arrears rising from 0.14% in mid-2022 to 0.24% in August 2025. That’s a 20.3% CAGR—over 10% faster than the ’90s. If the trend continues for the same length, the arrears rate would hit 0.57%, matching the rate in 1996. Climbing for that long may seem absurd—but prominent economists are warning investors that this correction will persist for years.
Foreclosures, however, may not follow the same path. In 1990, Ontario consolidated mortgage law to simplify the Power of Sale—a faster, cheaper alternative to foreclosure that allows lenders to sell a property without taking possession. While the remedy existed previously, the change further simplified it and helped to standardize it in mortgage contracts. Considering the recent explosion of use in Southern Ontario today, lenders may not be worried—but that isn’t very comforting for households, is it?
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