The Great Canadian Real Estate Downturn isn’t easing—in fact, it’s accelerating beneath the surface. Canadian Bankers Association (CBA) data shows the mortgage arrears rate climbed again in August, hitting the highest in nearly four years. However, the more important issue is flying under the radar: an unprecedented contraction in total mortgage volumes at banks. A shrinking credit base implies tightening liquidity—amplifying risk if investors realize the exit is closing faster than expected.
Canadian Mortgage Arrears Rate Highest Since 2020
Canadian mortgage arrears rate at CBA member banks.
Source: CBA; Better Dwelling.
Mortgage arrears at Canada’s largest banks climbed to a multi-year high. The arrears rate reached 0.24% in August, up 1 basis point (bp) from the previous month and 4 bps higher than last year. It’s now at the highest rate since September 2020, with most Big Six banks reporting even higher rates in recent filings.
The rate rising 4 bps may not sound like much, but it shows 20% growth in arrears relative to total mortgages. Mortgages in arrears hit 11,661 in August, up 15.9% (+1,597) from last year. The trend points to mounting credit stress that could be made worse by total mortgage volume.
Canadian Mortgage Market Shrinks As Households Step Back From Steep Prices
Total residential mortgages at CBA member banks.
Source: CBA; Better Dwelling.
One of the more unusual signals in the CBA data is the steady decline in total mortgages. Member banks held 4.94 million mortgages in August, down 1.7% (-86.2k) from a year ago. This isn’t a blip, but mortgage counts peaked at 5.12 million in June 2022 and have since fallen 3.5%, marking the lowest level since October 2020. Year-over-year growth has remained negative since April 2023, the first sustained contraction since records began in 1995.
The rising arrears may not warrant much attention at this point, but when paired with a shrinking mortgage base they do. This signals a shift from household stress to market-level liquidity risk. Arrears are backward-looking—they rise when owners can’t sell fast enough to avoid default. Fewer new mortgages means fewer buyers, tighter liquidity, and a growing risk that the market can’t absorb distress without triggering deeper losses.
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