Mortgage Default Surge: Ontario City Faces Credit Crisis as Debt Cycle Peaks
Brampton, a fast-growing city west of Toronto, is at the heart of Canada’s mortgage troubles as a growing number of homeowners miss loan payments and lenders force the sale of their homes.
The municipality has the highest mortgage delinquency rate among larger Canadian cities, according to data from Equifax Canada. And its rate of delinquencies – defined as at least 90 days of missed payments – has been rising at a faster pace than in the rest of the country.
“What we’re seeing in Brampton is the result of several pressure points landing on the same market at the same time,” said Rakhi Madan, a mortgage broker with more than 15 years of experience in Brampton.
She points to higher borrowing costs, a drop in home prices and mounting job losses as factors in the city’s mortgage difficulties.
In Brampton, the delinquency rate on total mortgages outstanding was 0.6 per cent in the final quarter of last year, according to data from Equifax, compared with 0.26 per cent nationally. In the same period in 2019, the delinquency rate was 0.06 per cent in Brampton and 0.18 per cent across the country.
Canada’s banking regulator recently raised concerns about rising home loan defaults and said the delinquencies and upcoming mortgage renewals are risks to the country’s financial system. While delinquencies are declining or stable in some parts of the country, they have been climbing in Ontario and British Columbia.
In many Ontario cities, the delinquency rate more than doubled from 2022 through the end of 2025, albeit from a very low level. That includes in cities such as Ottawa, Kingston, Peterborough, Oshawa, Toronto, Hamilton, Kitchener, St. Catharines, London, Windsor and Barrie, according to data from Canada Mortgage and Housing Corp.
Equifax has identified five cities – Brampton, Toronto, Markham, Oshawa and Vancouver – as primary drivers behind the overall surge in delinquencies in Canada.
And there’s a risk that defaults could mount further.
When the Bank of Canada aggressively raised interest rates in 2022 and 2023, mortgage experts feared waves of homeowners would not be able to handle the sharp increase in mortgage payments at renewal time. But as the central bank cut interest rates in 2024 and 2025, mortgages became cheaper and fears dissipated as the impact was not as severe as previously thought.
However, mortgage rates have moved higher over the past few months after the outbreak of the Middle East war.
Now with predictions that the central bank will raise interest rates later this year and expectations of continuing pressure on jobs if tariff disputes remain unresolved, mortgage problems could worsen in places that have already seen an increase in delinquencies.
Part of the problem stems from a steep jump, and then drop, in home prices over the past six years.
In Brampton, the typical home price almost doubled from $638,700 in 2019 to $1.24-million in early 2022 and has since decreased 30 per cent to $855,000 in March, according to Toronto Regional Real Estate Board data.
Those who bought in 2021 and 2022 are carrying large mortgages that are now renewing at higher interest rates, exacerbating their payment burden.
“It’s really coming down to high balance mortgages and the impact of interest rates on renewals,” said Rebecca Oakes, vice-president of advanced analytics at Equifax Canada.
Data show that homeowners with larger loans have higher delinquency rates compared with those with smaller mortgages. For example, Brampton homeowners with mortgages between $800,000 and $1-million had a delinquency rate of 1.13 per cent compared with about 0.2 per cent for loans that were $300,000 or less.
Another factor adding to the financial duress is the composition of Brampton’s economy, where a larger share of its labour force is working in industries that have been hurt by U.S. tariffs and a weaker economy.
For example, manufacturing accounted for 12 per cent of Brampton’s work force compared with 7 per cent in Toronto and 8 per cent nationally, according to the latest census.
In addition, Brampton has the highest percentage of households in Canada supporting at least three generations of families living together. Here, 14.3 per cent of households were multigenerational, according to the census, compared with 2.9 per cent of households nationally.
Ms. Madan said those households have higher day-to-day costs as there are more people to support, and when mortgage payments go up, the squeeze is felt more quickly.
This month, the average interest rate on the popular five-year fixed mortgage reached 4.19 per cent, according to data from MortgageLogic.news. That’s higher than the 3.83 per cent prior to the start of the Middle East war in February and about double the rates of 2020 and 2021.
Delinquencies trigger lenders to sell a homeowner’s property to recoup the missed payments in what is known as a forced sale or power of sale. Lenders can start that process as soon as a borrower misses a payment.
Today, one in every 20 homes in Brampton is a power-of-sale listing, according to Jackson Scarfe, a realtor with Re/Max Plus-City Team Inc. that specializes in power-of-sale properties.
In the rest of Ontario, one in every 50 homes is a forced-sale listing, according to Mr. Scarfe’s research on the Multiple Listing Service (MLS) database.
Mr. Scarfe said many of the power-of-sale listings in Brampton are from homeowners who bought during the pandemic’s real estate boom.
That means they likely have not paid off much of their mortgage and are more vulnerable to the drop in prices. Homeowners can’t refinance and take equity out of their home if the value of their property has sunk below the size of their mortgage.
When compared with its neighbouring city of Mississauga, Brampton’s housing market shows more signs of financial stress.
In the first three months of this year, 14 homes sold under power of sale in Brampton, compared with six in Mississauga, according to Sattar Erfanian Pour, a realtor with HomeLife/Bayview Realty, which has years of experience handling distressed sales.
Last year, 43 homes sold under power of sale in Brampton compared with 13 in Mississauga. In 2022, the peak of the real estate boom, there were only five forced sales in Brampton and three in Mississauga, according to Mr. Erfanian Pour.
“There is growing financial pressure in the market,” he said. His research shows homes sold under power of sale in the two cities are at their highest level in a decade.
The troubles in the Brampton housing market are set to worsen as more mortgages come up for renewal this year and next.
The federal banking regulator estimates that about 1.3 million mortgages, or 22 per cent of total mortgages in Canada, have fixed payments and are due to renew for the first time since they were originated in 2021 and 2022.
The Office of the Superintendent of Financial Institutions expects these homeowners to “experience material monthly payment increases.”
Ms. Madan said the situation will get worse before it gets better.
“It is about the concentration of risk,” she said. “More households here are managing high housing costs, larger family obligations, and less margin for error at exactly the moment mortgage payments are resetting higher.”
This article was first reported by The Globe and Mail
