Mortgage renewals and affordability squeeze
Many Canadians will renew their mortgages at higher rates over the next two years. DBRS said that for every 1% rise in mortgage rates, households would need to spend about 4% more of their income on payments for an uninsured mortgage, and about 4.5% more for an insured one. The mortgage debt service ratio rose to 7.85% in Q2 2025, mainly due to higher renewal costs.
Despite these headwinds, the report noted that “credit risk is partially mitigated by the stress tests that require borrowers to be qualified at the greater of the minimum qualifying rate or the contractual mortgage rate plus 2%.”
The consumer savings rate, while down from 6.2% in Q2 2024, remained elevated at 5.0% in Q2 2025, well above pre-pandemic levels.
Housing market activity and policy response
National average unit sales were largely flat year over year as of June 2025, but activity rebounded at the start of Q3, with unit sales and prices up 5.7% and 1.9%, respectively, by August.
In major markets, the Greater Toronto Area saw seasonally adjusted unit sales drop 4.9% year over year in Q2, before rebounding 8.8% in August. The Greater Vancouver Area followed a similar pattern.