Smaller mortgages historically carried larger delinquency risks in Canada. Not anymore. TransUnion data now shows the largest mortgages falling into arrears at more than double the rate of the smallest. The reversal resembles the unwinding of the US housing bubble, when those with supersized mortgages rapidly cracked.
Canadian Mortgage Risk Is Usually Concentrated At The Bottom
Payment stress is traditionally seen in the smallest mortgages, where borrowers tend to have more modest incomes. In Q3 2022, when all mortgage sizes by originations were at record lows, that pattern held true: sub-$200k mortgages posted the highest delinquency rate at 0.19%, outpacing the $200k-$400k segment by 6 basis points (bps) and dwarfing the largest mortgages. Once rates normalized, that logic fell apart faster than financing for an overvalued Toronto condo pre-sale.
Canada Is Seeing Risk Flip As Speculators Meet Rate Normalization
Through 2022-2023, those with the most debt began to feel the pain. The sub-$200k delinquency rate reached 0.21% by Q4 2023, up 2 basis points (bps) or 10.5% higher than record lows. It may sound small, but this is a seriously sharp rise in the delinquency rate, though it pales in contrast to larger mortgages.
Mortgages $850k or higher also climbed to 0.21% in Q4 2023, up 13 bps or 162.5% higher over the same period, nearly tripling. In other words, those with modest means were behind on payments at the same rate as borrowers whom lenders felt were secure enough to borrow at least 4x more. Except the problem didn’t stop here.
Mo Money, Mo Problems: Canada’s Largest Mortgages See Arrears Surge
Canadian mortgage delinquency rates by size of mortgage at origination.
Source: CMHC; Transunion; Better Dwelling.
The most recent data shows the sub-$200k mortgage borrower delinquency rate reached 0.24% in Q3 2025, adding 3 bps (+14.3%) since Q4 2023. In contrast, the delinquency rate for mortgages at least $850k climbed to 0.52%, up 31 bps (+147.6%) over the same period. Yes, the delinquency rate for large mortgages more than doubled that of small mortgages.
Larger mortgages are a smaller share of total mortgage pools, but they’re also higher impact. An $850k delinquent mortgage is equivalent to more than four $200k mortgages, and they are falling into arrears at a higher rate.
Canadian Mortgage Delinquencies Following US Housing Bubble Pop
The reason behind the trend may be counterintuitive, but it mimics how the US housing bubble played out in 2008. While the narrative is that low-income households defaulted, it was investors using subprime lenders to obtain excess leverage that were the issue. Lower-income borrowers performed as expected, while investors struggled to make payments on their excessive debt.
Canada’s investor-dominated real estate market is now following a similar trajectory. When low rates spurred demand, it didn’t take long for investors to crowd end-users out of the market. During the frenzy, an RBC executive noted that investors were replacing first-time buyers in their portfolio. StatCan data also revealed that 75% of home ownership growth was captured by investors during this period. The frenzy was so wild that over 80% of Toronto’s new housing was being purchased by investors, who are now struggling to close without questionable appraisal math.
The most interesting part of Canada replicating the US housing playbook, however, is the risk transfer scheme. Households have been presented with the narrative that many of these taxpayer-funded schemes are to help low-income buyers struggling to navigate high home prices with credit normalization.
If entry-level buyers are locked out, and the working class isn’t the one defaulting, who are these taxpayer-funded bailout programs meant to save? The data makes it obvious—even if policymakers try to convince households otherwise.
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