Market memo: Consumer credits trends – August 2025

  • First National Financial LP
The federal financial watchdog has added residential real estate to its list of key risks to the Canadian economy. 

The Office of the Superintendent of Financial Institutions has added “continued housing market pressure” as one of two new factors in an update to its Annual Risk Outlook (ARO).  The other is rising unemployment. 

Regulator Blames U.S. Tariffs 
OSFI’s initial ARO, released back in March, included four concerns:  integrity and security; wholesale credit; funding and liquidity; and real estate secured lending and mortgage (RESL) risks.  Since then, OSFI says, the escalation of U.S. tariff uncertainty has added to housing market pressure. 

“The uncertainty of tariff negotiations has reduced the activity of lenders, borrowers, consumers, and suppliers as they await resolution.  The threat of rising costs for key economic inputs [such as land, materials, fuel and equipment] and the potential for higher unemployment levels reduce confidence and inhibit investment,” OFSI says in its latest report. 

Recovery is Slow and Uneven 
“The housing market in Canada faced strains prior to the April trade tensions and continues to show signs of weakness.  Softening economic conditions will cause more strains over the coming year,” says OSFI. 

The regulator points out that housing transactions remain below 10-year averages while more homes are being listed for sale and prices are declining, particularly in some of Canada’s largest markets.   

Increasing Delinquencies 
OSFI notes that missed payments are on the rise.  

“Household credit delinquencies continue to increase, albeit from historically low levels, as borrowers navigate a weakening economy and contend with higher debt-service payments.  Delinquency rates are returning to levels observed pre-COVID.” 

Maturity Concerns Easing 
However, the regulator also says concerns about real estate secured lending and mortgage risks have diminished. 

“RESL maturity concerns have lessened as renewal rates will likely be lower than those faced in 2024, given the seven Bank of Canada rate cuts since June 2024.  A subset of borrowers will still experience significant payment increases.  As of May 2025, 31% of all outstanding mortgages [fixed rate and variable rate fixed payment] are renewing by the end of 2027, which were originated when rates were at historic lows (pre-March 2022).” 

Financial System is Meeting the Challenges 
“Canadian financial institutions continue to navigate a challenging risk environment and face uncertainty related to trade and tariffs.  Nevertheless, OSFI judges the resilience in the system as sufficient to absorb the potential materialization of key risks.” the regulator says. 

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