While default rates remain below long-term averages, their sudden rise is creating ripple effects that homeowners, investors, and developers can no longer ignore.
Mortgage industry veteran Ron Butler explains how defaults, condo stress, and bond market jitters are converging to put new pressure on Canadian real estate. Here are the key insights.
1. Defaults Are Rising — But It’s Not a Crisis Yet
During the pandemic, mortgage defaults “almost went to zero.” Today, 90-day defaults are climbing but remain below the historical norm of 35–36 basis points. The message? This is less a panic and more a “return to normal.”
2. Power of Sale Creates Neighbourhood Price Drops
The bigger issue isn’t just the defaults — it’s the ripple effect. When power of sale properties hit the market, they set new, lower comparables. That drags down surrounding property values across entire neighbourhoods. For Ontario homeowners, a nearby foreclosure can instantly reduce their paper wealth.
3. Small Condos Are Facing a “Horror Show”
Toronto’s smallest condo units are in freefall. Some developers are now offloading inventory at $675 per square foot, while original buyers paid $1,100 just five years ago. This “shameless destruction of value” is leaving owners underwater and threatening mortgage approvals for units that haven’t yet closed.
4. The Condo Crisis Is Spreading Beyond Toronto
What started in the GTA is now showing up in Calgary, where condo towers were heavily bought by Toronto investors rather than local buyers. With rents softening and appreciation hopes fading, the condo correction may be going national.
5. Bond Market Sends Warning Signals
Despite BoC rate cuts, bond yields are climbing, reflecting concerns over Canada’s growing deficit and long-term debt sustainability. This bond market pushback is keeping mortgage rates higher than expected, limiting relief for struggling borrowers.
The Takeaway: A Market at a Crossroads
Ontario’s housing market isn’t collapsing — but it is recalibrating. Rising defaults, condo stress, and credit market uncertainty mean homeowners and investors need to tread carefully.
At Lendworth Canada, we specialize in helping borrowers and investors navigate market turbulence with custom mortgage solutions, refinancing options, and private lending strategies that balance short-term needs with long-term resilience.
✅ Bottom Line: Ontario’s mortgage defaults are still manageable, but the ripple effects on prices and confidence are real. For homeowners and investors, the key is planning ahead.
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