Credit & Debt | Spring 2026 rennie Landscape

Apr 29, 2026

SHARE THIS

This article is a section of the Spring 2026 edition of the rennie landscape, our semiannual report on the forces shaping housing markets in Metro Vancouver and across our key markets.

Each section of the landscape explores a different piece of the broader story—from interest rates and the economy to demographics, credit, and housing. Together, they provide context for understanding how these factors interact and what they mean for Metro Vancouver’s housing market.

Household borrowing is once again on the rise as interest rates have fallen. Residential mortgage debt is the primary driver of that growth.
⁠
HOME IS WHERE THE DEBT IS
⁠
The amount of new debt taken on by Canadians is, in part, sensitive to interest rates. That is, when interest rates are low, borrowing increases--this was the case in 2020 and 2021 when borrowing grew to record highs. Conversely when rates are high, like they were in 2023, borrowing tends to fall. More recently, fixed and variable interest rates have fallen to their lowest levels since the summer of 2022, so it doesn’t come as much of a surprise that the amount of new debt taken on by Canadians rose in 2025. And even though home sales in major markets here in BC have lagged, the growth in household borrowing nationally has been concentrated in mortgages.
⁠
⁠Canadians took on $142 billion in new debt in 2025, a 3% increase over 2024. The growth was driven entirely by new mortgage lending, which was up 18% year-over-year to $111 billion. Mortgages accounted for 78% of the net additional debt last year, which was the highest share since 2022. Other forms of household lending, meanwhile, saw yearover-year declines in 2025. Non-mortgage debt additions (which includes home-equity lines of credit) fell 48% to $5.6 billion, while consumer credit additions was down 24% to $25 billion.
⁠
⁠That the distribution of household borrowing is leaning further towards mortgages is a good thing for Canadians’ balance sheets. Mortgage debt generally carries lower interest rates and is secured against borrowers' most valuable asset. Additionally, Canadians have a documented history of prioritizing their mortgage payments, though as we explore in the next section, the share of Canadians falling behind on their mortgage payments has been growing.

CHOOSE YOUR OWN DEBT INDICATOR
⁠
Just because Canadians are taking on more debt, as we just discussed, doesn’t automatically mean it’s more onerous for them. To understand how Canadians are managing their debt loads we can observe two key metrics: the debt service ratio (DSR) and the mortgage arrears rate. The DSR is the share of income required to service all debts, so total debt matters, as do interest rates and incomes. The mortgage arrears rate is the share of borrowers who are 90 days or more behind on their payments.
⁠
⁠DSRs have been on a downward trend since peaking in Q4 2023 at 15.13%, falling most recently to 14.57% in Q4 2025. Both the mortgage and non-mortgage components of DSR have been trending downward as interest rates have been falling and incomes modestly rising. The DSR is still elevated from a historical perspective, but trending in the right direction in terms of gauging borrowers’ health.
⁠
⁠The mortgage arrears rate, however, is on an opposite trend, rising to 0.26% at the end of 2025, up from just 0.14% in Q3 2022. The trajectory is clear as Canadian borrowers are increasingly challenged in staying on top of their mortgage payments. The overall level, though, is still quite low—just 26 out of every 10,000 borrowers are in arrears in Canada— and the rate is now back to 2017 levels.

THE TIMES THEY ARE A-CHANGIN'
⁠
The 5-year fixed rate mortgage has historically been the preferred choice for Canadian borrowers. This trend has shifted as borrowers increasingly favour shorter terms in search of better rates.
⁠
As we noted earlier, the amount of new borrowing in Canada has been increasing, which has led to the amount of outstanding mortgage debt growing to its largest level ever: $1.6 trillion. While that’s certainly a massive number, outstanding mortgage debt only grew by 3.8% over the past year. The much more notable change in outstanding mortgage debt is in the composition of the mortgages as Canadians have eschewed the 5-year fixed rate mortgage.
⁠
⁠The 5-year and greater fixed rate share of Canada’s mortgage debt (by dollar volume) fell to 23% at the end of 2025, its lowest level in the Statistics Canada data set going back to 2016. The stability brought by the 5-year f ixed rate mortgage had made it the most popular, averaging 42% of all outstanding mortgage dollars over the past decade and peaking at 52% in early 2021. That, however, was back when mortgage rates were at all-time lows and a borrower could lock in their rate for five years at sub-2%.
⁠
⁠Fast-forward five years and borrowers have been facing significantly higher rates at renewal. Unsurprisingly, many have chosen instead for variable or 3-year fixed rate mortgages to lessen the impact of higher rates. In December, the average rate on funds advanced for 3 to less than 5 year uninsured mortgages was 11 basis points lower than the 5 years and greater category, while the average variable rate was 17 basis points lower. Renewers are trading the security of the longer term for lower interest rates and lower payments today, which is one of the reasons why debt service ratios have remained in check, as we noted earlier.
⁠

BALANCE SHEETS ARE BLINKING RED
⁠
A relatively weak economy has impacted tax revenues while government spending has been concurrently rising. The result: record-high deficits in British Columbia and Canada.
⁠
Large budget deficits and government debt are nothing new in politics. Governments of all stripes have been using debt to cover spending for generations. The US government has been using structural deficits going back to the 1980s. Here in Canada, the federal government has had a budget deficit in every year but one since 2010 (2015). In BC, however, budget surpluses have been fairly common, including in six years out of the decade preceding the pandemic, and as recently as 2022.
⁠
⁠Lately, however, BC has followed the path of the Canadian and US governments, with record-setting deficits. This year’s budget forecasts a deficit of $13.3 billion which equates to 2.9% of GDP. While that trails the US on a relative basis (5.8% of GDP), it exceeds Canada’s deficit which is projected to be $78.3 billion or 2.5% of GDP. This budget deficit also comes with tax increases and spending cuts that will have implications for taxpayers. We discuss the housing-related measures within the budget later on in the Policy section.
⁠
⁠Additionally, large budget deficits mean governments need to issue new debt, in the form of bonds. Increasing the supply of bonds at previously unseen amounts will put downward pressure on bond prices. That in turn puts upward pressure on bond yields, which pushes up interest rates.