Monday Market Minute | Aug 11, 2025
Halfway through the 2025 mortgage renewal wave, credit quality metrics are holding better than feared as BoC cuts and lender flexibility absorb the shock.
What Moved
With roughly half of the estimated $300 billion in 2020-era mortgage renewals now processed, the Canadian banking system released interim credit quality data that was cautiously encouraging. Mortgage arrears rose modestly to 0.28% — above the 0.15% pandemic-era trough but well below the 0.45% level that had triggered concern in 2008. Lenders reported that extended amortizations and payment flexibility programs were effectively managing borrower stress. MIC delinquency rates remained stable at approximately 1.3%.
Why It Matters
The better-than-feared credit outcome had two implications for private markets investors. First, it reduced tail risk in mortgage-linked portfolios — both MICs and private credit funds with real estate collateral. The scenario of a cascading default wave, which had weighed on sentiment since 2024, was not materializing. Second, it confirmed that the borrower displacement from banks to alternative lenders was driven by regulatory qualification criteria, not credit weakness — reinforcing the quality of the MIC lending pipeline. The renewal wall was proving manageable, not catastrophic.
Signal to Watch
The remaining $150 billion in renewals would process through the fall and winter. Whether credit quality held through that second wave, when seasonal employment softness typically peaks, was the outstanding question.