At first glance, it might seem that the financial pressures experienced by Canadian families would have eased over the last year or so. The spike in interest rates which started in early 2022 has abated, with the Bank of Canada cutting its benchmark rate several times since mid-2023. As well, the rate of inflation, which had reached 6.8% in late 2022, began moderating during 2023 and now (as of March 2025) stands at 2.3%. It would seem, then, that both the cost of daily life (as reflected in the rate of inflation) and the cost of debt servicing (as reflected in the Bank’s benchmark interest rate) would have both become more manageable in recent months.
Those cheering statistics, however, fail to take account of some other aspects of ongoing financial realities for some Canadians, and those financial realities are showing up in debt management statistics recently released by the credit rating agency Equifax Canada.
In February 2025, Equifax released its Q4 2024 Market Pulse Consumer Credit Trends Report. That report showed that in all provinces missed payments on most forms of consumer debt had risen from the same quarter in 2023. Perhaps most significantly, the report showed a substantial increase in the rate of missed payments on mortgage debt. Missed mortgage payments are a significant indicator of consumer financial distress since, as noted in the Equifax report, “[m]ortgage holders will typically do everything they can to keep up with payments” and “[t]he fact that we’re seeing missed payments rise so sharply suggests deeper financial strain.”
While home owners are generally perceived to have greater financial resources and financial stability than other population groups, it is homeowners who are actually most likely to be feeling the financial pinch in 2025 – and the reasons for those financial difficulties are not likely to be resolved anytime in the near future. The financial strain being experienced by homeowners is likely attributable to the “mortgage renewal wall”, a reference to the fact that so many homeowners have recently been required to renew their mortgages, or will be required to do so in the near future.
Most Canadian homebuyers, especially first-time homebuyers, take out a five-year fixed-term mortgage. On a fixed-term mortgage, the interest rate payable (and therefore the amount of the mortgage payment) is set for that five-year term, giving the homeowner certainty when it comes to budgeting. The difficulty for homeowners now is that five-year mortgages which were taken out in 2020 are coming up for renewal – and the interest rates at which those mortgages will be renewed (and therefore the required mortgage payments) are much higher than the historically low rates which were in effect in 2020.
It’s a problem faced by literally millions of Canadian households. Statistics announced by the Bank of Canada in November 2024 indicate that “[M]ore than 4 million mortgages – or about 60% of all outstanding mortgages – will renew over the next two years. A big portion of these have not renewed since interest rates started rising in 2022. Even with recent declines in interest rates, most of those borrowers will likely face a significant increase in their payment.”
Of course, Canadian families who are facing substantial increases in their mortgage payments don’t really care about the micro or macroeconomic reasons for those increases. What they seek is a way to make those mortgage payments affordable – to avoid missing payments or, in a worst-case scenario, defaulting on their mortgage and losing their home.
Individuals or families who are facing what seems to be an unmanageable increase in their mortgage payment (or who have already incurred other debt in an effort to keep the mortgage paid) should understand, however, that there are viable options open to them to avoid those worst-case scenarios – and equally, that there are courses of action which should be avoided.
Where an individual or a family feels overwhelmed by debt, or unable to keep up with mortgage or other debt payments, it’s inevitable that they will be vulnerable to approaches which promise to make the problem go away quickly and easily. Sometimes those approaches come from debt settlement companies, and the website of the Financial Consumer Agency of Canada (FCAC), an agency of the federal government, notes (at Using a debt settlement company – Canada.ca) that Canadians should be aware that such companies (which go by various descriptions) are usually for-profit businesses, not service providers. Such companies collect fees from consumers who are in financial difficulty, sometimes making unrealistic commitments with respect to what they can accomplish. For instance, while such companies may promise to negotiate with creditors in order to reduce any amount owed, or the interest rate payable on existing debt, the fact is that creditors are not obliged to speak to or negotiate with a debt settlement company with respect to another person’s debts. Debt settlement companies may promise to “fix” a poor credit rating or credit report, but they have no actual power to do so. And the fees paid to such companies will almost certainly have to be paid whether or not they can actually produce the results they promise.
That reality does not, however, mean that there is no help for individuals and families who are looking at an increase in payments when they renew their current mortgage, or who are already trying to cope with increased mortgage payments. Canadian financial institutions are, in fact, expected by the Financial Consumer Agency of Canada to provide support to “consumers at risk” – and in this context, that term includes those with fixed-rate mortgages reaching near-term maturity who may be facing a material increase in payments, as well as those who are at risk of mortgage default. That support, referred to as mortgage relief measures, can include a wide range of options, including extending the amortization period of a mortgage, skipping a payment or deferring mortgage payments for a period of time, allowing the homeowner to re-negotiate a mortgage at a lower interest rate, waiving internal costs or fees, waiving pre-payment penalties where the homeowner sells their home, or not charging interest on interest. The FCAC has a webpage specifically outlining the options which can be made available to homeowners who are experiencing difficulty meeting mortgage payments, and that webpage is available at Paying your mortgage when experiencing financial difficulties – Canada.ca.
The intricacies of mortgage financing – and making a determination of the cost/benefit of the available courses of action when current mortgage payment obligations become unsustainable – are complex, and not something that most homeowners can be expected to manage without help, especially when those homeowners are under significant financial stress. There is, however, help to be had, as almost every community of any size has a credit counselling agency which can assist homeowners (or any other person or family encountering financial difficulties) in managing their current financial situation.
Such credit counselling agencies operate on a not-for-profit basis and provide their services at little or no cost to individuals or families for their services. Each such agency is a member of Credit Counselling Canada (to be a member of Credit Counselling Canada, an agency must be accredited and must operate only on a not-for-profit or charitable basis), and a listing of their member agencies and locations can be found on the Credit Counselling Canada website at https://creditcounsellingcanada.ca/locate-a-counsellor/?cc=ON. An outline of the kinds of services which are provided by such agencies is available on the same website at https://creditcounsellingcanada.ca/.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
