For years, there have been concerns that softening real estate markets in Ontario and British Columbia would lead to painful mortgage losses at Canada’s major banks. However, the figures tell a strikingly different story.
Between Nov. 1, 2025, and Jan. 31, 2026, Canada’s Big Six banks collectively wrote off just $38-million from a combined mortgage portfolio of $1.76-trillion. According to WOWA Data Labs, which aggregated data across Canadian lenders, total mortgage writeoffs by the Big Six banks over the past four quarters were $168-million, just 0.01 per cent of total mortgage holdings. It’s an astonishingly low figure.
Three key factors help explain why the mortgage portfolios of the largest banks have been so remarkably resilient.
First, defaults remain rare across the board. As of December, 2025, just 0.24 per cent of mortgage holders were more than three months in arrears. This reflects the strength of Canada’s regulatory framework, particularly the mortgage stress test, which requires borrowers to qualify at rates above their contracted rate, building a buffer against adverse shocks.
Borrower incentives reinforce this: Canadians go to considerable lengths to avoid default, knowing that lenders can pursue their other assets to recover outstanding balances.
Second, risk is not shared equally among lenders. The Big Six have largely steered clear of the riskier end of the mortgage market. As of December, 2025, the national mortgage arrears rate stands at 0.24 per cent, while the comparable figure for mortgage investment corporations is significantly higher at 2.01 per cent.
The divergence is stark, and it reflects years of disciplined underwriting by the major banks. When analysts speak of mortgage risk in Canada, they are largely describing a segment of the market that the Big Six have deliberately avoided.
Third, even when borrowers default, bank losses are limited. Canadian mortgage insurance requirements provide a critical backstop. Borrowers with less than 20 per cent down must carry default insurance, transferring that risk to insurers such as Canada Mortgage and Housing Corp.
For buyers with larger down payments, equity typically provides a sufficient cushion for the lender to recover the full outstanding balance through a sale, even after fees and price declines. Only in cases of severe price drops approaching the original down payment would a bank face meaningful loss, and even then, recourse provisions allow lenders to pursue the borrower’s other assets.
Canada’s broader mortgage system has proven sound and durable, but the Big Six occupy the safest corner of it, holding near-zero writeoffs against a multitrillion-dollar book. For these institutions, residential mortgages remain not just a low-risk asset class, but one of their most reliably profitable businesses.
Hanif Bayat, PhD, is the CEO and founder of WOWA.ca, a Canadian personal finance platform.
