Concerns surrounding the potential impact of declining real estate markets in Ontario and British Columbia on Canada’s major banks have been alleviated by recent data. The Big Six banks have reported minimal mortgage write-offs, indicating a surprising robustness in their mortgage portfolios despite ongoing market fluctuations.
Minimal Write-Offs Highlight Stability
Between November 1, 2025, and January 31, 2026, the collective write-offs from Canada’s largest banks amounted to a mere $38 million, a fraction of their total mortgage portfolio valued at an impressive $1.76 trillion. Data from WOWA Data Labs reveals that over the previous four quarters, total mortgage write-offs amounted to just $168 million, representing a minuscule 0.01 per cent of the banks’ total mortgage holdings. Such figures underscore an unexpected resilience within the sector, challenging previous fears of a potential crisis.
Low Default Rates Bolster Confidence
One of the key reasons behind this stability is the exceptionally low rate of mortgage defaults. As of December 2025, only 0.24 per cent of mortgage holders were more than three months behind on their payments. This figure is a testament to Canada’s robust regulatory environment, particularly the mortgage stress test, which requires borrowers to qualify at rates significantly higher than their actual mortgage rates. This mechanism creates a safety net against economic downturns, encouraging borrowers to prioritise their mortgage obligations. Canadians are often highly motivated to avoid default, aware that lenders can pursue other assets to recover outstanding debts.
Unequal Exposure to Risk
Moreover, the risk associated with mortgage lending is not uniformly distributed among all lenders. The Big Six banks have strategically avoided the riskier segments of the mortgage market. While the national mortgage arrears rate stands at 0.24 per cent, mortgage investment corporations report a significantly higher rate of 2.01 per cent. This stark contrast illustrates the disciplined underwriting practices adopted by the major banks, which have largely sidestepped the more volatile areas of lending. Consequently, when analysts discuss mortgage risk in Canada, they are often referring to sections of the market that the Big Six have intentionally chosen to avoid.
Insurance Shields Against Losses
Even in scenarios where borrowers do default, the losses for banks remain limited, thanks to stringent mortgage insurance requirements. Borrowers who make down payments of less than 20 per cent are mandated to obtain default insurance, transferring the associated risk to insurers such as the Canada Mortgage and Housing Corporation. For those with larger down payments, the equity they possess typically provides enough of a buffer for banks to recover the total outstanding balance through property sales, even in the event of market price declines. Significant losses would only arise in extreme cases where property values plummet to the level of the original down payment, but even then, lenders have recourse provisions allowing them to seek repayment from borrowers’ other assets.
Why it Matters
The resilience of Canada’s mortgage system is a crucial indicator of overall financial health within the banking sector. The Big Six banks, by maintaining near-zero write-offs against their vast mortgage portfolios, have demonstrated that they are not only well-positioned to weather market fluctuations but also to continue generating reliable profits from residential mortgages. This stability is vital not just for the banks, but for the Canadian economy as a whole, as it instills confidence in the financial system amidst ongoing concerns about real estate market volatility.