Mortgage Defaults Rise Among Higher-Credit Borrowers
Homeowners with stronger credit scores are increasingly defaulting on their mortgage payments, an alarming trend that reveals the impact of higher mortgage rates on traditionally lower-risk borrowers.
New data from Equifax Canada show defaults growing not only for the weakest subprime borrowers, but also for more financially stable homeowners with credit scores in the 621 to 680 range, which is the middle-tiered group.
Equifax’s credit scores are rated on a scale from 320 through 880, with the more creditworthy, or prime borrowers, above 660 and the weakest below 580. The scores are based on customers’ past histories of managing their debt.
More of the mid-tier borrowers – known as near-prime borrowers – are missing their mortgage payments by at least 90 days. Across the country, their delinquency rate increased by 31 per cent from the fourth quarter of 2024 to the same period in 2025, according to Equifax data.
That was an even quicker pace than the weakest subprime borrowers, with credit scores of 320 to 520 and of those in the 521 to 580 range. Over the past year, their delinquency rates rose 23 per cent and 28 per cent, respectively.
Equifax said in an e-mail to The Globe and Mail that there is an “alarming acceleration of financial stress” that is rapidly expanding to more creditworthy borrowers, and said it was an indication that “severe payment shock is actively spreading from subprime borrowers into the established middle class.”
“Nobody’s excluded,” Kathy Catsiliras, Equifax Canada’s vice-president of analytical consulting, said in an interview. Ms. Catsiliras said having a good credit profile does not necessarily mean a customer has a lot of extra cash to handle higher mortgage payments.
“Savings are depleting because they’re just trying to keep up, trying to stay current, trying to stay on top of payments. So distress is really coming through,” she said.
Although the Bank of Canada slashed interest rates in 2024 and 2025, mortgages are still pricier than during the pandemic’s real estate boom when the interest rate on home loans was below 2 per cent.
Today, the popular five-year fixed rate mortgage is being advertised in the 3.6-per- cent to 4-per-cent range. The higher monthly mortgage payments combined with higher grocery bills and other living expenses are eating away at Canadians’ paycheques and savings.
Across the country, more homeowners are falling behind on their mortgage payments with those in the priciest real estate markets of Toronto and Vancouver leading the way.
The Equifax data show homeowners in those two markets along with the relatively expensive markets of Brampton, Markham and Oshawa are under greater stress. In these five cities, the delinquency rate has increased for every type of mortgage borrower.
Delinquencies for near-prime borrowers in those five markets rose at the highest pace, rising 55.6 per cent from the fourth quarter of 2024 to the same period last year. Subprime borrower delinquencies went up by 50 per cent; prime borrowers climbed by 32.5 per cent and those with the highest credit scores saw their delinquency rate increase by 4.5 per cent.
“A lot of consumers are really feeling squeezed, and even more so where the mortgage monthly payment is now significantly higher,” Ms. Catsiliras said. “That’s what we’re seeing in terms of why we’re seeing delinquency rates spike.”
The Equifax data show that the homeowners with the largest mortgages or home loans greater than $800,000 are having more trouble making their payments.
In Ontario and British Columbia – home to Canada’s most expensive real estate – the delinquency rate on those super large loans increased by 28 per cent and 26 per cent, respectively, over the past year.
Ms. Catsiliris said higher interest rates on a large mortgage can result in a significant jump in monthly payments.
While the rate of delinquencies has climbed, the overall level is not high across the country for those with a credit score near-prime and above.
Nationally, the delinquency rate for near-prime borrowers was 0.44 per cent in the fourth quarter of last year. For the weakest subprime borrower, the delinquency rate was 15.3 per cent and for the most creditworthy borrowers, it was 0.01 per cent, according to Equifax. The delinquency rate across all borrowers in the country was 0.26 per cent at the end of last year.
In the five pricey real estate markets, the delinquency rate for near-prime borrowers was 0.64 per cent in the fourth quarter of last year. It was 19.97 per cent for the weakest borrowers or those with a credit score between 320 and 520; and 0.01 per cent for the strongest, according to Equifax.
Nearly two-thirds of the near-prime homeowners took out loans from the country’s five largest banks, according to Equifax, while the rest got their mortgages from other lenders.
This article was first reported by The Globe and Mail
