CIBC’s Benjamin Tal warns early cracks in household credit hint at mortgages coming under pressure by 2026
Beneath the surface of Canada’s stable banking system, early signs of strained household debt are starting to emerge.
The latest data from the Canadian Bankers Association shows the national mortgage delinquency rate edged up to 0.24 per cent in August, the highest level in five years. While still historically low, it points to the same early-stage credit stress CIBC deputy chief economist Benjamin Tal noted in a new report.
Tal said that while delinquency rates remain low by historical standards, the latest signs point to changes in household credit conditions, particularly among renters, subprime borrowers and homeowners with other debt.
But first, Tarr pointed out some bright spots in the data.
He noted that credit growth has fallen from its pandemic highs but remains consistent with pre-COVID-19 patterns, supported by stable lending conditions and a healthier borrower mix. The average credit score remains well above 2019 levels, and although the share of subprime borrowers has increased, it has only returned to pre-pandemic normal levels.
Additionally, Canadians appear to be managing their credit limits carefully, with utilization rates remaining around 65%. He added that bankruptcies had stabilized, with an increasing shift towards consumer advice, with these cases resulting in smaller losses for lenders and higher recovery rates than outright bankruptcies.
“Household credit quality indicators don’t look too concerning right now,” he said. “But a closer look at profits reveals that the current trend is not your friend,For example, he noted that early delinquency rates in the subprime market are already well above 2019 levels.
Non-mortgage loan stress flashes first
Tarr said early signs of stress are mainly seen among renters and non-mortgage debt.
“Renters are clearly feeling the impact of the labor market slowdown,” he noted, with credit card and credit line delinquency rates now comfortably above 2019 levels.
Homeowners are not immune. Tal said non-mortgage debt held by households with mortgages was starting to show early signs of stress. “Most mortgage borrowers facing difficulties will first stop payments on other credit facilities such as credit cards and, more importantly, lines of credit,” he explained, calling this a clear warning to lenders.
A bigger test will come in 2026
So far, mortgage delinquency rates are only slightly higher than they were before the pandemic, which is more due to job losses than a rate reset. But Tal expects the real test to come in the second half of 2026, when the share of borrowers facing mortgage payment increases of more than 40% could hit 5% to 6% of the market, more than double the current share.
“The message here is that mortgage delinquency pressures are likely to persist and, in fact, may intensify, mainly in the second half of 2026,” he wrote.
Still, Tal said preemptive action by lenders and a job market likely approaching peak unemployment should help limit losses. “Future credit losses should be in line with, or better than, market pricing,” he wrote.
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Last modified: November 3, 2025
