Indebted Canadian Homeowner Disasters
The troubles continue
The homeowner debt disasters I’m hearing daily are, frankly, insane.
Another 5 homeowners called me last week and more already this week about their debt situations. That’s 5 in one week, and that seems about the average right now for my own office, when before about 18 months ago I had barely spoken to any homeowners at all for about a decade. It’s all breaking loose now.
All of this and we have yet to see most of the expected wave of mortgage renewals yet for 2025/26. Plus the prebuild condo mess for all those who often rushed into that market.
For several years, homeowners didn’t need to call an insolvency trustee because home prices were rising and their equity along with it, so they could always utilize that to resolve any unsecured debt problems they had. Cool.
But now, in 2025, many people’s more equity has been either wiped out or reduced by falling prices, and/or they simply aren’t able to qualify for home equity or refinance solutions as banks tighten up and/or if their credit profile has been damaged.
I’ll give you a scenario of what I’m seeing:
- Couple, 2 kids, western part of the GTA
- Sold a condo at a loss ($72,000) in 2023 (it was costing them too much; underwater on rent payments from new tenant, carried it for a long time before selling)
- A presale condo closing in a few weeks, cannot close due to valuation being way down; stand to lose $76,000 deposit plus facing lawsuit; est $100,000+
- Wife lost her job 6 months ago
- Leased car they are returning with 13 months left on it; facing shortfall est $8,000
- Their own house/dwelling; bought early 2022, up for renewal 2027
o Cost $800,000; current value $920,000; equity $74,000 approx.
o Struggling to pay the mortgage
- Credit card debts all run up since about 2023 and especially since her job loss
o Him: $58,000
o Her: $42,000
o Both have income tax debt
- Household income when she was working: $130,000 gross annual (yes, I know – how?)
Typically, homeowners have substantially more unsecured debt (credit cards, lines of credit, tax debt) than renters. Our Hoyes Michalos annual Joe Debtor study (here ) shows this consistently. For 2024, homeowners who filed insolvencies with us had $99,000 in unsecured debt, while our average filer had about $60,000. Reason? Homeowners have more costs in general, but more importantly, they are more creditworthy in the eyes of lenders. So the lenders give them much more rope, so to speak.
Also, in the scenario above, when things start to hit the fan (negative financial events such as job loss, properties losing value, sudden higher costs, etc., not to mention general economic issues such as inflation), homeowners have to resort to even more borrowing to keep all the plates spinning. It spirals.
We are going to see a lot of this in the next few years.