Real estate experts say higher interest rates could still bring about mortgage defaults despite new guidelines meant to protect mortgage owners.

Earlier this month the Financial Consumer Agency of Canada (FCAC) released a set of guidelines aimed at encouraging lenders not to take advantage of mortgage owners distressed by rising interest rates. FCAC is a government agency that regulates and supervises financial institutions’ compliance with legal obligations and protects consumers’ interests. 

Leah Zlatkin, a mortgage broker and expert with, said in an interview with Monday that despite outsized increases to interest rates, Canadians have largely been making their mortgage payments. However, she said that low mortgage delinquency rates are occurring among A-lenders, and it is less clear what is taking place among B-lenders and private lenders

Canada’s A-lenders include major banks and credit unions that cater to customers with strong credit scores, according to, while B-lenders are institutions with a lower barrier to entry often with higher interest rates.

“We have to realize that this is only the tip of the iceberg, you can't see the bottom of the iceberg below, we don't know what is happening with B-borrowers and private borrowers,” Zlatkin said.

Following the release of the new FCAC guidelines earlier this month, Zlatkin said it could be “foreshadowing of some risks in the industry potentially.” 

“If there's no risk, why would they propose it if they didn't think that there was some amount of certainty that there would be people going into default? Especially if there are increases in the unemployment numbers,” she said. 

Daniel Vyner, the principal broker at DV Capital, said in an interview with Monday that the Bank of Canada’s monetary tightening campaign has drastically increased mortgage costs for homeowners with variable rate products with fixed payments.

“There’s no secret or surprise anymore that fixed [payment] variable rate mortgage holders are in the red or, [or] in the deep end so to speak,” he said. 

The Bank of Canada has hiked interest rates 10 times since March of last year, which cumulatively brought interest rates to the highest point in 22 years at five per cent.

Vyner said that there could be more mortgage defaults taking place in the future, but likely not on a large scale. 

He said, “it’s reasonable to suggest that mortgage defaults will be taking place” if banks do not adhere with FCAC recommendations and “they are no longer allowed to pretend and extend” by lengthening amortizations upwards of 70-80 years.

Vyner said in that situation, “homeowners are going to be required to either increase their mortgage payments drastically or be asked to pay down their mortgage.”

“How many [more defaults would occur?] I don't believe it will be catastrophic, given the current low percentage of mortgage defaults. But I do believe it’s reasonable to suggest that there will be some casualties out there,” he said.

Zlatkin said that people have generally been meeting their mortgage obligations largely due to the fact that “the only group of people that are really dramatically impacted by higher rates” are variable mortgage owners with variable payments. 

“So that's a very small subset of the population that is actually paying the piper every single time the rates go up,” she said, adding that many people will see the impact of higher interest rates at renewal.

She also said that low unemployment rates mean Canadians can continue to meet their loan obligations.


According to a blog post from last week, the recently released FCAC guidelines were created to protect at-risk mortgage owners, setting expectations for how lenders will work alongside borrowers impacted by rapid interest rate increases.

The federal government stated in March that guidelines would be put in place in its 2023 Federal Budget to address mortgage owners impacted by high-interest rates. said FCAC wants to ensure banks provide “tailed support” to at-risk borrowers, including mortgage owners with variable rate products on fixed payments and those navigating negative amortization. 

One of the relief measures includes waiving prepayment penalties for borrows looking to make a lump sum to prevent negative amortization, or for those forced to sell their home and break their mortgage, said.

Relief measures also included not charging interest if the application of relief measures resulted in negative amortization, according to

Extended amortizations, accompanied by education on relevant implications and a plan to restore the original amortization period, were also among the relief measures.

This story has been updated from a previous version to clarify the role of the Financial Consumer Agency of Canada.