The Mortgage Crunch: How Ontario’s Rising Defaults Are Redefining Risk for Investors

As Ontario’s real estate market adjusts to a post-pandemic landscape, a new challenge is emerging—not from falling home prices or interest rate hikes, but from rising mortgage defaults. For real estate investors and homeowners alike, 2025 is shaping up to be a critical year of recalibration.

While mortgage delinquency rates in Ontario remain relatively low by historical standards, they are climbing faster than in any other province, raising red flags for anyone with exposure to the housing market. With more than a million fixed-rate mortgages coming up for renewal this year, the pressure on homeowners—and the potential opportunities for strategic investors—have never been greater.

A Growing Concern: Ontario’s Mortgage Delinquencies Near a Tipping Point

Ontario’s mortgage delinquency rate hit 0.22% in the final quarter of 2024, nearly double what it was a year earlier, according to Equifax Canada. That figure may seem small, but the velocity of the increase is alarming—up 90% year-over-year, and outpacing all other provinces. In comparison, British Columbia saw a 37.7% increase, and Quebec 41.2%.

In practical terms, more than 11,000 mortgages in Ontario were delinquent in Q4 alone. And with home prices still roughly 40% higher than early 2020 levels, many of those defaults involve large loan amounts. In fact, the average balance on a new Ontario mortgage at the end of 2024 was $434,744.

Why Many Borrowers Are Falling Behind

At the heart of the problem is a wave of mortgage renewals. During the ultra-low interest rate environment of 2020–2021, many buyers locked in historically low mortgage rates—often below 2%. Fast forward to 2025, and those same borrowers are now renewing at rates closer to 4.3% to 4.5%, with some seeing monthly payment increases of $500 or more.

Even though the Bank of Canada has gradually lowered its policy rate, the relief has not yet translated into meaningful reductions in mortgage payments. As Equifax’s Kathy Catsiliras notes, “There’s a lag impact in terms of those rates helping to slow down the overall mortgage delinquency rate.”

Default Hotspots: Where the Pressure Is Building Fastest

Certain Ontario cities are feeling the strain more acutely. In Toronto, the mortgage delinquency rate rose to 0.23%, while London recorded an even higher rate of 0.27%. These markets are also grappling with elevated non-mortgage debt delinquency rates—especially in Toronto, where 90+ day non-mortgage delinquency hit 2.06%.

This dual stress on mortgage and consumer debt indicates broader financial pressure on households, not just isolated mortgage mismanagement. For investors, it’s a cue to pay closer attention to regional debt trends, not just property values.

Investors Take Note: Risks, Opportunities, and Strategic Moves

So what does this mean for investors?

While rising defaults are undeniably a risk signal, they also open a window for opportunity—particularly for those who approach the market with a long-term, fundamentals-first strategy.

Here are a few ways real estate investors can respond:

1. Watch the Renewal Cycle

With more than 1 million fixed-rate mortgages set to renew in 2025, the peak pressure is still ahead. Investors in multi-family or rental properties should reassess tenant risk, especially if units are occupied by homeowners turned renters or those struggling with payment adjustments.

2. Prepare for Distressed Opportunities

As defaults rise, some distressed homeowners may seek quick exits. This could lead to more motivated seller listings—especially in suburbs and secondary markets where payment shocks are higher. These properties may offer below-market acquisition opportunities for cash-ready investors.

3. Partner with Specialists

Legal and financial complexity increases when defaults and distressed sales come into play. Partnering with Medvisory through our experienced mortgage brokers, real estate lawyers, and property managers will be key to navigating potential acquisitions or working with defaulting tenants.

4. Explore Private Lending

With more homeowners struggling to qualify for traditional refinancing, the private lending space could see a surge in demand. Investors may consider allocating capital toward private mortgages or joint ventures that provide short-term financing solutions to distressed borrowers.

Not Just a Mortgage Issue: The Broader Debt Storm

The data suggests mortgage stress is just one piece of the puzzle. Credit card delinquency rates rose 16.5% in 2024, with younger Canadians hit hardest. Non-bank auto loans climbed 11.7%, and overall consumer debt in Canada grew to $2.56 trillion—up 4.6% from 2023.

In short, many Ontario households are now managing multiple forms of debt, all while navigating rising living costs and stagnant wage growth. Investors must weigh not only the affordability of their real estate assets but also the financial resilience of the end users—whether they’re tenants or buyers.

What About the Government?

So far, there’s been no sweeping relief policy from the federal or provincial governments aimed specifically at easing mortgage defaults. While interest rate cuts may provide some relief in the latter half of 2025, that won’t help homeowners who are renewing at higher rates today.

Policy makers could introduce temporary mortgage relief programs, refinancing supports, or even development incentives to ease supply bottlenecks, but for now, the burden remains on individual borrowers—and the private sector.

The Bottom Line: Risk Management Is the New Strategy

Ontario’s rising mortgage delinquency rates are a warning signal—but not a cause for panic. For thoughtful investors, this is a moment to stress-test portfolios, refocus on fundamentals, and prepare for potential opportunities in a more volatile landscape.

Whether that means repositioning assets, exploring distressed acquisitions, or lending privately, the key is adaptability. Default risk may be climbing, but so is the chance to build a more resilient, diversified real estate strategy.

At Medvisory, we help physician investors and professionals approach real estate strategically—even in times of economic uncertainty. From helping you identify undervalued opportunities to structuring private lending investments or vetting potential joint ventures, our team ensures you’re not just reacting to market trends—but staying ahead of them.

Rising mortgage defaults aren’t the end of Ontario’s real estate growth story—they’re just a new chapter. Let’s navigate it together.