Juggling Dynamite

Since June 2024, interest rates have trended down from a two-decade high, yet remain above the historically low levels seen during the pandemic.

Approximately 1.2 million Canadian mortgages will renew in 2025, a vast majority (85%) of which were secured when the Bank of Canada’s key lending rate was at or below 1% compared with 2.75% today. From the 1.5% to 3% range in 2020-21, Canadian fixed mortgage rates are currently in the 4.2% to 4.55% range (6.09% to 6.99% in the United States).

A recent Royal LePage survey reveals that 57% of Canadian homeowners with mortgages set to renew in 2025 anticipate an increase in their monthly payments. Among these individuals, 81% expect this rise to impose financial strain on their households, with 34% describing the strain as significant.

This financial pressure is prompting many to adjust their spending habits. Specifically, 60% plan to reduce or eliminate discretionary spending, 43% intend to cut back on travel, 36% will decrease their savings or investments, and 34% aim to reduce spending on essentials like gas and groceries. Additionally, 23% are considering obtaining a second job or finding another source of income.

Already, payments that are 90 days+ late have risen to 1 in 22 mortgages nationally.  The number of serious delinquencies increased by 72% year over year in Ontario and by 38% in BC.

All of this makes Canadians less able to absorb price increases inspired by tariffs. While the Bank of Canada is concerned about the inflationary impacts, declining demand from retrenching consumers is a reliable disinflationary force.

Slowly, then all at once…job losses ‘unexpectedly’ leaping across many sectors.

Andy Challenger, Senior Vice President, Challenger, Gray & Christmas, shares his insights on the latest Challenger layoff report in the U.S. and what sectors were most impacted.  Here is a direct video link.

Yesterday, the Bank of Canada (BoC) held its overnight rate target at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70%. They did not ease monetary conditions while noting that domestic demand remained flat and the labour market had weakened. The unemployment rate–at 6.9% in April–is expected to rise into 2026.

Headline inflation eased to 1.7% in April, primarily due to the elimination of the federal consumer carbon tax. The BoC emphasized that the high level of uncertainty surrounding U.S. trade policies, particularly recent tariff increases on Canadian steel and aluminum, poses significant risks to the Canadian economy, affecting exports, business investment, and consumer spending. Further reducing the competitiveness of Canadian exports, the loonie has appreciated 5.8% against the US dollar since January 31st. 

The BoC’s next scheduled interest rate announcement is on July 30, 2025, which will coincide with the release of its Monetary Policy Report. In the meantime, credit conditions are deteriorating and financial stress is on the rise. The discussion below offers insight.

Hoyes Michalos is the top Consumer Insolvency Firm in Ontario. Insolvency Trustee Scott Terrio is a return guest with extremely timely updates on insolvency trends. Truly awful Trends. Massive Increase In Homeowner Insolvencies. CRA goes wild – an extreme increase in Aggressive Collections. Credit Availability has DRIED UP. Here is a direct video link.