Canadians Face Rising Mortgage Debt and Housing Affordability Challenges

Canadians are grappling with increasing mortgage debt, which is projected to approach $2 trillion by 2025, according to a report from Equifax Canada. As the country navigates a significant wave of mortgage renewals, the Canada Mortgage and Housing Corporation estimates that at least 1.5 million households had renewed their mortgages by the end of 2025, with an additional million expected to follow suit in 2026.

The latest data indicates that total mortgage debt reached $1.95 trillion in the fourth quarter of 2024, marking a 2.6 percent increase compared to the previous year. “Interest rate stabilization is appearing to have a positive impact on homeowners and the Canadian mortgage industry; however, in hotter housing markets, affordability remains a concern,” said Rebecca Oakes, vice-president of advanced analytics at Equifax Canada.

The report highlights the burden of high mortgage balances, particularly for first-time homebuyers. The average new loan amount has risen by 4.1 percent to reach $363,778, while first-time buyers faced an even steeper increase, with their average new loan size climbing 5 percent to $441,301.

Many households are experiencing “payment shock,” a term used to describe the sudden increase in monthly mortgage payments following renewal, leading some to switch lenders. Oakes noted the trend of rising missed payments on higher-value mortgages in Ontario, as post-renewal payment levels prove challenging for some consumers.

Starter Homes Become Less Accessible

Alongside rising mortgage costs, new homebuyers are struggling with the affordability of starter homes, as highlighted in a recent report by the University of Ottawa’s Missing Middle Initiative. Despite a 76 percent increase in incomes since 2004, the price of new homes at the lower end of the market has skyrocketed by 265 percent.

“Brand-new family-sized starter homes are over twice as expensive relative to income as they were 20 years ago. Unless governments get serious about bringing down the cost of homebuilding, it will take another 20 years to fix,” stated economist Mike Moffat. The report predicts that even if home prices stabilize, it would take 25 years for the price-to-income ratio to revert to levels seen in 2004.

Moffat emphasized the need for government action not only to reduce homebuilding costs but also to engage in “grown-up conversations” regarding significant changes to Canada’s zoning laws. This would permit more infill development, aiming to address the mismatch between housing supply and demand. “We need to examine the building code to identify areas where homes are unnecessarily expensive and open up new housing types, as the starter home of 2034 may have to be different from that of 2004,” he advised.

In summary, the increasing mortgage debt and the rising costs of starter homes indicate a pressing challenge for many Canadians. The situation calls for urgent attention from policymakers to ensure that housing remains accessible for future generations.