Canadian banks are seeing mortgage arrears rates climb to multi-year highs, according to the Canadian Bankers Association (CBA). Historically, the Big Six banks are known for their low-risk approach, but recent regulatory filings show that most now have much higher mortgage arrears. The unusual skew is far from over, with most banks also reporting faster arrears growth.
Canadian Mortgage Arrears Rate Hits Multi-Year High
The CBA has observed a rising trend of arrears. The arrears rate climbed to 23 basis points (bps) in June, up 4 bps (+21%) from last year. While the rate isn’t at dizzying heights, it’s still a substantial jump for just a year and the highest reported since February 2021. Credit quality is most definitely eroding at a national level.
Despite Canada’s Big Six representing the majority of loans and a lion’s share of the CBA’s reporting members, most of these banks have much higher arrears rates.
Canadian Mortgage Arrears Rate Higher Than Average At Most Big Six Banks
Canadian mortgage arrears rate (basis points, Q3 2025).
Source: Better Dwelling; CBA; Big Six regulatory filings.
Canada’s Big Six banks are historically known for having better than average performance, but not this time. The latest Q3 2025 regulatory filings (ending July 31st) show that five of the Big Six banks have residential mortgage arrears higher than the CBA average. The highest is BMO at 37 bps, sitting 14 bps higher than the national average. It’s followed by CIBC (36 bps), RBC (31 bps), National Bank (27 bps), and Scotiabank (24 bps)—the last being just a hair above the national average.
The only Big Six to outperform the average was TD with an arrears rate of just 13 bps.
Canada’s Big Six Banks Have Seen Mortgage Arrears Surge
Canadian mortgage arrears annual growth (Q3 2025, %).
Source: Better Dwelling; CBA; Big Six regulatory filings.
As we regularly mention, the actual number is less important than the velocity of change. A stable market, even one underperforming, doesn’t present as much immediate concern as one that’s actively deteriorating. It’s only when a dramatic shift occurs, and performance becomes uncharacteristic, that it signals a problem.
What we’re seeing is a rapid erosion in residential mortgage borrowers’ ability to meet their obligations. The 21% increase at the CBA is already fast as an average, but four of the Big Six banks dwarf that annual growth rate: National Bank demonstrated the fastest shift, with its residential mortgage arrears 59% higher than last year. It’s followed closely by BMO (+54% y/y), TD (+44%), and RBC (+41%).
Two banks—Scotiabank and CIBC—performed slightly better, both reporting 20% growth from last year.
Canadian Big Six Mortgage Arrears: Household Weakness or Investor Woes?
Canada’s Big Six tend to lead the market in terms of quality, and generally see less volatility. They almost have a monopoly on higher income households with stable income and high credit scores. The fact that they’re leading in arrears, arrears growth, or both, is an unusual development that implies elevated risk. The fact the rates are still aggressively climbing also means these issues are unlikely to hit a plateau soon.
Typically this would sound the alarm for household financial stress, but it may be an investor-driven one this time. As previously noted, investors were the primary buyer of new construction condo apartments. These banks also hold the majority of investor-owned mortgages on recently completed, cash-flow negative condos in Toronto—Canada’s largest market that’s currently in free fall, and heading towards a hard landing.
However, the biggest sign it’s an investor-driven issue is Canada’s bank regulator delaying the adoption of Basel III risk standards. The regulator recently reiterated its delay for the new rules that would see banks adopt global risk weighting. One of the biggest changes would be how banks view non-owner occupied homes, as they’re considered 50% more risky. The regulator previously confirmed these rules would come into effect by 2023, but they have yet to be implemented.