Rising mortgage costs to stress other debts: Fitch

With a large portion of residential mortgages facing higher interest rates this year, other forms of borrowing — such as credit cards and auto loans — could see delinquencies rise, says Fitch Ratings.

In a new report, the rating agency said that, even as approximately 30% of mortgages are expected to reprice higher in 2026, it expects the mortgage market to remain resilient, with mortgage delinquencies to “remain broadly stable.” 

However, Fitch also expects higher mortgage payments to hit household finances, with delinquencies in “lower priority loans” potentially rising as a result.

“Canadian household leverage is rising and savings rates are falling, although they remain above pre-pandemic levels,” the report said. “Inflation and mortgage repricing will continue to strain consumer credit, particularly for renters and mortgaged homeowners.”

The average mortgage payment increase is expected at about 6% overall, although for some loans, the increase could be as high as 15% to 20%, Fitch said.

“Households with outsized leverage, lower incomes or those employed in U.S. export-reliant sectors will remain more vulnerable,” it said.

However, mortgage delinquencies are seen remaining stable amid “strong home equity growth … rate cuts in late 2025, and unemployment that seems to have peaked,” it said.

Additionally, lenders are expected to work with strained borrowers to avoid defaults.

Instead, that pressure may show up in households’ less significant loans, which could increase banks’ credit losses.

“This could slightly strain credit quality at Canadian banks and negatively affect [asset-backed securities] performance,” it said.

However, Fitch said that these other forms of lending make up a small portion of the banks’ loan portfolios, and it does not expect these losses “to be material enough to affect Canadian bank earnings.”