Canada’s top banking regulator says lenders should prepare for economic turbulence as trade talks drag on and tariffs remain unresolved. Blacklock's Reporter says Superintendent of Financial Institutions Peter Routledge said uncertainty is growing and his office is stepping up scrutiny of bank lending.“A potential shock due to unexpected, volatile events could hit consumers and businesses more severely than what has been discounted,” Routledge wrote in his Semi-Annual Risk Outlook. “The lack of clarity on tariffs is generating unease amongst consumers and businesses facing an outlook highly sensitive to the outcome of ongoing negotiations.”Routledge said the Office of the Superintendent of Financial Institutions is ramping up “heightened monitoring” to ensure banks can handle possible stress scenarios. .“Given our concerns about unexpected economic outcomes and the potential for broad financial market strain due to continued uncertainty, we are focused on institutional preparedness for stress events,” he said.The report pointed to “signs of weakness” in the housing market, “softening economic conditions” linked to tariff threats, and a risk of higher unemployment. The timing is crucial, with 3.3 million mortgages set for renewal by the end of 2026.Routledge said household credit delinquencies are climbing, though still below crisis levels..“Borrowers are navigating a weakening economy and contending with higher debt service payments,” he wrote. “Delinquency rates are returning to levels observed pre-COVID.”He said the biggest trouble spots are variable-rate, fixed-payment mortgages, as well as loans to self-employed and investor borrowers. “Delinquency levels in Toronto continue to surpass delinquencies in other major centres. Within the housing market, the condo segment exhibits the greatest weakness,” said Routledge..A separate report from the Financial Consumer Agency of Canada backed up those warnings. The agency said 35.5% of Canadians hold a mortgage, and two-thirds of them are struggling to keep up with payments. Renters, who make up 41% of Canadians, are also feeling the squeeze.“Given the significant increase in house prices since 2020, a growing number of households have taken out sizeable mortgages relative to their income,” the agency said. “As a result, many recent homebuyers have little home equity to borrow against and are turning to credit cards to stay afloat.”
