November 4, 2025
| Highlights Power of sale listings have surged across the GTA, rising 112% year over year as higher borrowing costs, job losses, and mortgage renewals at higher rates push more homeowners and investors into default. High-interest private mortgages made during the housing boom are now going delinquent Canada faces a mortgage renewal wall, with most mortgages coming due in 2025–2026 at much higher rates, pushing more households toward default. Investors are heavily affected, as many condo owners and preconstruction buyers can no longer cover costs or close on purchases. Home equity is shrinking, leaving recent buyers with little to no cushion as values return to pre-2021 levels. |
Toronto’s real estate market has entered one of the most significant transitions in recent memory. After years of rapid appreciation, bidding wars, and an upward climb in equity, the housing sector is now confronting a reality of falling prices, rising unemployment, and a surge in power of sale listings. As of mid-2025, average home prices in the Greater Toronto Area have declined by approximately five to ten percent per year after the peak in early 2022, and the pattern shows no signs of ending quickly. This decline follows a short-lived period of stability brought on by the Bank of Canada’s recent interest rate cut, which has not been enough to offset the broader economic pressures at play.
Active listings across the GTA have climbed to near record highs, and homes are taking significantly longer to sell. The supply of available properties has grown by more than 40% compared to the previous year, reflecting a clear imbalance between supply and demand. At the same time, the unemployment rate in the Toronto area has spiked to roughly 10%, which has been the highest level since 2016. Historically, there is a strong correlation between unemployment rates and the number of mortgages in arrears, and this relationship is once again becoming evident power of sale listings, continue to climb.
In October 2024, power of sale listings rose by an astonishing 112% from the previous year. This surge did not emerge overnight. Instead, it has been building steadily since early 2022, as higher borrowing costs and inflation began to erode household finances. For many homeowners, especially those who purchased near the market peak in early 2022, the combination of higher mortgage payments and declining property values has proven unsustainable.
The rising number of power of sale listings is a clear indicator of growing financial strain among homeowners. As of September 2025, there were approximately 228 new power of sale listings across the GTA. This is up 59% from the same time last year, when there were only 143 power of sale listings. In normal market conditions, the number of power of sale properties would represent less than one percent of total listings. The recent increase, therefore, represents a substantial deviation from the norm.
This trend has serious implications for both property owners and the broader housing market. During the pandemic, home prices rose so sharply that almost anyone at risk of default could simply sell their property or refinance to avoid legal action. In 2020, there were as few as four power of sale listings per month across the GTA. That number increased modestly to 33 power of sale listings per month in 2021 and 38 listings per month in 2022, before climbing to 83 listings per month in 2023. By 2024, the monthly average power of sale listings had reached 160, which is the highest level in more than a decade.
The current wave of distress is being driven by a combination of factors that have converged at an unfortunate moment in Canada’s credit cycle. Between 2022 and 2023, the Bank of Canada raised interest rates at the fastest pace in decades, tripling borrowing costs in an effort to contain inflation. Although those hikes succeeded in slowing the growth of house prices, they also introduced severe payment shocks for variable-rate borrowers and for those nearing renewal.
Two-thirds of existing mortgage holders who are renewing this year are facing equal or higher payments despite the recent rate cuts. This is because fixed-rate borrowers who secured ultra-low rates in 2020 or 2021 are now reaching the end of their terms and are encountering much higher renewal rates. It is estimated that roughly 60% of all Canadian mortgages — representing tens of billions of dollars in debt — will come due for renewal within the next twelve months. Each renewal represents another household forced to confront higher payments, tighter budgets, and fewer refinancing options.
For those who bought during the height of the market, the situation is even more precarious. Home prices have fallen back to early 2021 levels, meaning that many purchasers from 2022 or later have little or no equity remaining in their properties. Some are now in negative equity positions, owing more on their mortgage than the home is worth. Without an equity cushion, these homeowners cannot refinance, consolidate debt, or sell without taking a loss. As a result, the number of power of sale filings continues to rise, creating a feedback loop of falling prices and increasing distress.
Despite this increase, the situation remains far less severe than what occurred during the 2008 U.S. housing crisis, when the American mortgage default rate exceeded 3.8%. In Canada, the comparable figure remains below 0.3%. Ontario’s provincial arrears rate is at roughly 0.16% as of mid-2024, which is still historically low. Nonetheless, the upward trajectory suggests that more households are approaching their financial limits, and the legal system is seeing an increased number of power of sale filings.
The composition of current power of sale listings reveals how deeply the market’s stress has spread. Historically, the most at-risk borrowers were those with weak credit or irregular income, often served by private lenders. Today, the pattern is more complex. Many of the homeowners now in distress are working-class families who stretched financially to enter the market during the pandemic boom. With job losses mounting and wages failing to keep pace with inflation, even middle-income earners are finding it difficult to absorb the rising cost of borrowing.
Investors are also a major component of the current wave of power of sale listings. In the GTA, condominiums account for approximately 28% of all such listings, and within the City of Toronto, condos make up nearly half of those listings. Many of these are investment properties owned by small landlords who relied on rental income to cover mortgage payments. As interest rates rose and rental rates began to soften, the cash flow on these units turned negative. Investors with multiple properties have been quick to walk away from their most unprofitable holdings, accelerating the number of distressed sales in the condo sector.
The preconstruction market has faced particular turmoil in the past couple of years. During the height of the housing boom, investors placed deposits on condominium projects with the expectation of assigning their contracts or reselling their property upon completion for a profit. However, as units have begun to close in 2024 and 2025, many buyers have discovered that appraised values are significantly lower than the original purchase prices. In some developments, assignment sales are being offered at 2018 or 2019 prices, erasing several years of appreciation.
For these investors, financing has become a major obstacle. Lenders are reluctant to provide full mortgage financing when the appraised value of the property is less than the agreed purchase price. Some buyers have walked away entirely, forfeiting their deposits and risking legal action from developers. Others have closed on their units only to immediately list them for resale, realizing substantial capital losses. This wave of forced sales adds further supply to an already saturated market and contributes to broader price declines across the region.
Another critical element in the increase of power of sale listings is the increased exposure of private lenders in the market. During the pandemic-era housing boom, a large number of individual investors began lending money privately, often through second mortgages or short-term bridge financing. This form of lending became a popular alternative investment strategy: borrow funds at a relatively low rate through a home-equity line of credit and re-lend them at rates of ten to fifteen percent to other property owners. For a time, this so-called “Canadian carry trade” generated strong returns and seemed low risk because property values were consistently rising.
When interest rates began to climb, the economics of private lending changed dramatically. Borrowing costs rose while property values fell, compressing returns and, in many cases, eliminating them altogether. Borrowers who had relied on refinancing to repay short-term private loans suddenly found that no lender would extend new credit against falling collateral values. Defaults in the private lending market increased sharply, and many of these loans proceeded to power of sale.
Since 2022, more than 4000 power of sale filings in Ontario have originated from individual or small private lenders. As of mid-2025, roughly 65% of all active power of sale listings are tied to such lenders.
Private lenders tend to act more quickly than banks when a borrower falls behind on payments. Unlike the federally regulated “A” banks, they are not bound by the Canadian Mortgage Charter, which encourages lenders to work with borrowers experiencing hardship. Because private lenders are often individuals or small corporations relying on the interest income to service their own debts, they have strong incentives to enforce their rights quickly. Consequently, borrowers who obtained high-interest private financing are at higher risk to lose their homes when markets weaken.
This pattern creates a form of a financial feedback loop. Many private lenders borrowed against their own residences to fund these loans. When their borrowers default, the lenders themselves may struggle to meet their own obligations. A power of sale initiated by a first mortgagee can easily wipe out a second mortgage, leaving the private lender with no recovery but an ongoing debt on their own home equity line of credit. The losses cascade across the system, reducing the availability of private credit and further tightening conditions for homeowners seeking refinancing options.
The Legal Process of a Power of Sale
In Ontario, the power of sale process begins when a borrower falls into default, usually by missing mortgage payments. After a default occurs, the lender serves a Notice of Sale under the Mortgages Act. This notice provides the borrower with a minimum of 35 days to bring the mortgage back into good standing by paying the arrears, interest, and legal costs. During this redemption period, the borrower may also attempt to sell the property independently or refinance with another lender.
If the borrower fails to remedy the default within the prescribed time, the lender may proceed to take possession of the property and list it for sale. In many cases, lenders obtain a writ of possession through the Superior Court of Justice to secure lawful control of the property. Once possession is obtained, the lender typically engages a licensed real-estate agent to market the property on MLS. The listing will identify the seller as the lender, followed by the words “Power of Sale.” The accompanying remarks generally state that the property is being sold “as is, where is,” with no representations or warranties and that all offers must include the lender’s Schedule B outlining additional conditions.
Buyers considering a power of sale property must understand that the lender has never occupied the home and cannot make representations regarding its condition, zoning compliance, or structural integrity. Due diligence, including inspections and title searches, becomes even more critical. Furthermore, the sale process can be slower and less flexible than a typical purchase transaction, as lenders require time to obtain internal approvals and adhere strictly to their standard contractual terms.
Until closing, the original borrower retains the right of redemption, which is the ability to pay the full amount owed and stop the sale at any time before title transfers. For that reason, even accepted offers can be cancelled if the borrower redeems, with the buyer’s deposit refunded.
Once a power of sale transaction closes, the sale proceeds are applied to the mortgage debt, accrued interest, taxes, and legal fees. If funds remain, they are paid to the borrower or other creditors according to priority. If the proceeds are insufficient, the borrower remains liable for the deficiency balance. Many such borrowers ultimately enter bankruptcy to discharge these obligations, highlighting the severe personal and financial consequences of default.
The growing number of power of sale properties has a pronounced effect on the broader housing market. Each forced sale adds inventory that would not otherwise exist, widening the gap between the number of homes available and the number of active buyers.
When a lender lists a property under power of sale, they are motivated to obtain a fair but quick sale. While they cannot deliberately underprice the property, they are typically pragmatic in adjusting the price until it sells. Every month that a property remains unsold adds further interest charges, legal costs, and maintenance expenses that the lender may ultimately seek to recover from the borrower. As a result, lenders prefer to move inventory rather than hold it indefinitely.
This practical approach to pricing has the unintended consequence of setting lower comparable sales in nearby neighbourhoods. Appraisers and buyers rely on recent sales to determine market value, and when power of sale transactions close at reduced prices, they can depress valuations for surrounding homes. Even if power of sale listings represent only a small fraction of total transactions — 1% or less — the impact on sentiment and comparables can be significant. The effect compounds over time, creating a downward spiral in which declining prices lead to more negative equity situations, which in turn generate additional power of sale listings.
The presence of power of sale listings also alters buyer psychology. While these properties often attract heightened interest from bargain hunters, the perception of widespread distress can create caution among regular purchasers. Sellers who are not in financial difficulty may lower their expectations to remain competitive with lender-listed properties. Collectively, these forces reinforce a self-perpetuating cycle of price weakness and reduced confidence.
It is crucial for borrowers to understand that defaulting on a mortgage in Canada does not end their financial responsibility. Under Ontario law, the borrower remains personally liable for any shortfall after the property is sold. The lender may pursue a deficiency judgment to recover the remaining balance, plus legal costs and interest. This liability can persist for years and can only be eliminated through repayment or bankruptcy. For this reason, homeowners facing financial distress should seek legal advice as early as possible to explore all available options before the situation escalates to enforcement.
The Canadian Mortgage Charter encourages federally regulated lenders to offer assistance to borrowers who are 90 days or more in arrears. Options may include extending the amortization period, temporarily deferring payments, or converting variable-rate mortgages to fixed rates. While these measures can provide breathing room, they are not guaranteed, and eligibility depends on the borrower’s overall financial profile. Early communication with the lender is essential. Once a Notice of Sale has been issued, the borrower’s leverage diminishes substantially, and opportunities for resolution become limited.
For some homeowners, voluntary sale may be the most prudent solution. Selling the property before the lender takes enforcement action allows the borrower to control the timing, marketing, and pricing of the sale, potentially preserving more equity. By contrast, once the lender initiates a power of sale, legal fees, default interest, and other costs quickly accumulate, eroding any remaining equity on the property. A well-timed sale can also protect the borrower’s credit rating and avoid the reputational harm associated with formal enforcement proceedings.
Investor distress in the Toronto region is not confined to the condominium sector. Many small-scale landlords financed multiple properties under the assumption that continued appreciation would offset temporary cash-flow deficits. The reversal of that assumption has left them highly leveraged and vulnerable. Rent growth has slowed, operating expenses have increased, and financing costs have doubled or tripled. For investors who relied on variable-rate financing, the rapid escalation of interest costs has turned once-profitable holdings into sustained losses.
Because investment properties are not primary residences, investors are generally quicker to surrender them when they become unsustainable. The result is an over-representation of investor-owned properties among current power of sale listings. This, in turn, places additional strain on the rental market, as tenants may face displacement when their landlords default. The cascading effects extend well beyond the immediate parties to the mortgage.
The implications for the construction industry are also significant. Developers facing slowing sales and a wave of assignment losses have delayed or cancelled new project launches. This contraction in building activity may eventually restrict supply, but in the short term it contributes to economic slowdown and job losses in construction and related sectors. The market is thus caught in a paradox: near-term oversupply and long-term under-building, both of which stem from the same cycle of tightening credit and declining confidence.
As Toronto moves through 2025, the market continues to display all the hallmarks of a late-cycle correction. Inventory levels remain elevated, and the ratio of sales to new listings has declined to levels last observed during the 2008–2009 financial crisis. The balance of power has shifted decisively in favour of buyers, and sellers are being forced to adjust their expectations to meet a more cautious and selective market. The combination of higher borrowing costs, reduced affordability, and widespread uncertainty has produced a genuine buyer’s market across much of the Greater Toronto Area.
Average home prices are now approximately twenty-three percent below the peak recorded in February 2022, returning values to those seen in early 2021. The severity of the correction varies by property type and region. Detached homes in outer suburbs have experienced the sharpest declines, while established urban neighbourhoods have fared somewhat better due to limited supply. Condominiums, particularly those aimed at investors rather than end-users, have recorded the most significant increase in power of sale listings. These patterns suggest that price recovery will not be uniform; rather, the market will move through an extended period of re-pricing and consolidation before stability returns.
The trajectory of the market will depend largely on two variables: unemployment and mortgage renewals. Historically, mortgage arrears have correlated with unemployment. Each increase in joblessness translates directly into missed payments, as households with little savings struggle to meet their obligations. With Toronto’s unemployment rate hovering near 10%, the risk of further arrears growth is high. In parallel, the so-called “mortgage renewal wall” will continue to exert pressure on borrowers. Every month, thousands of homeowners reach the end of their low-rate terms and confront a substantially higher payment. Those unable to adjust their budgets or refinance at acceptable terms will face the difficult choice of selling or defaulting. This renewal-related distress is expected to peak in 2026.
Although power of sale is a financial process at its core, it operates within a precise legal framework that imposes obligations on both lenders and borrowers. For lenders, the duty to act in good faith and to obtain fair market value is paramount. Courts have consistently held that mortgagees exercising a power of sale are fiduciaries in a limited sense: they must protect their own interests but cannot act recklessly or oppressively toward the mortgagor. The standard applied is that of a prudent and reasonable seller. Documentation, appraisals, and marketing efforts must all demonstrate that the lender sought a fair price consistent with market conditions at the time of sale.
For borrowers, the existence of that duty provides some protection, but it does not eliminate the financial consequences of default. If a lender sells the property and the proceeds are insufficient to satisfy the debt, the borrower remains personally liable for the deficiency. Lenders commonly pursue such deficiencies through the civil courts, and judgments may be enforced through garnishment or registration against other assets. In practice, many borrowers who face large deficiencies ultimately seek relief through consumer proposals or bankruptcies under the Bankruptcy and Insolvency Act. The lasting impact on creditworthiness can be severe, often persisting for years.
It is also important to recognize that the power of sale process can intersect with other areas of law, including family law, estate law, and bankruptcy. For example, if the property is jointly owned by spouses, enforcement proceedings must comply with the Family Law Act’s provisions concerning matrimonial homes. Similarly, if one of the borrowers dies, the lender may need to coordinate enforcement with the estate trustee. These complexities highlight why early legal advice is essential whenever a borrower is in financial distress. Proactive legal guidance can identify potential defences, negotiate repayment arrangements, or facilitate a voluntary sale that mitigates further loss.
Beyond individual transactions, the surge in power of sale listings has macroeconomic implications. Forced sales increase market supply and can exert downward pressure on prices across entire neighbourhoods. As prices fall, homeowners lose equity, which in turn reduces their ability to borrow against their homes to fund their mortgage payments, renovations, education, or small businesses. The reduction in household wealth contributes to lower consumer spending, slowing overall economic activity. In a city like Toronto, where real estate and construction account for a substantial share of employment, the ripple effects can be far-reaching.
There is also an important psychological component. Rising defaults and stories of financial hardship erode public confidence. Potential buyers delay purchases in anticipation of further declines, while potential sellers rush to list before prices fall further. The resulting imbalance reinforces the downturn. Even those who remain financially secure become more cautious, choosing to save rather than spend or invest. Such shifts in sentiment can extend the duration of a correction well beyond what fundamental economic factors might dictate.
The experience of the early 1990s provides a sobering precedent. Following the 1989 market peak, Toronto home prices declined for nearly seven years as high interest rates and elevated unemployment persisted. It was not until the mid-1990s that the market began to recover. While the current environment differs in some respects—today’s mortgage underwriting standards are stricter, and the banking system is better capitalized—the parallels are difficult to ignore. Without a sustained improvement in employment conditions and a gradual reduction in debt-servicing burdens, a quick rebound appears unlikely.
From the perspective of buyers, the growing number of power of sale listings presents both opportunities and risks. On one hand, these properties can offer access to homes at prices below recent market averages. On the other hand, they require heightened due diligence and an understanding of the legal limitations inherent in such transactions. Because lenders sell properties on an “as is” basis and disclaim all warranties, purchasers must assume responsibility for verifying the condition and compliance of the property. This includes obtaining independent inspections, reviewing title for potential liens or easements, and carefully reading the lender’s Schedule B, which modifies many standard contractual terms.
The negotiation process in a power of sale transaction also differs from a traditional sale. Lenders are institutional sellers with standardized procedures and limited flexibility. Offers may take longer to receive responses, and conditions favourable to buyers—such as financing or inspection clauses—are often discouraged or removed.
Additionally, because the original borrower retains the right of redemption until closing, there is a small but real risk that a transaction may not complete if the borrower redeems at the last moment. For this reason, buyers who are under time constraints or seeking certainty of occupancy should proceed cautiously.
Legal representation is indispensable in these transactions. A lawyer experienced in power of sale purchases can review the sale documentation, confirm that the lender’s title is valid, ensure proper registration of discharge instruments, and protect the buyer’s deposit in the event the sale is terminated. Professional guidance also helps buyers understand the broader context of the sale—why the property is being sold, whether there are competing claims, and what post-closing issues may arise.
For homeowners facing payment difficulties, the most important step is to communicate early and openly with their lender. Most financial institutions prefer to avoid enforcement proceedings and are often willing to explore alternatives such as temporary payment deferrals, amortization extensions, or term conversions. These measures may not eliminate the problem but can provide time to reorganize finances or sell the property voluntarily.
Where a voluntary sale is contemplated, engaging both a real estate agent and a lawyer early in the process can yield better outcomes. A pre-emptive sale conducted before legal proceedings begin allows the homeowner to control the listing price and marketing strategy. The costs associated with a private sale are significantly lower than the legal fees, default interest, and administrative charges that accrue once a power of sale is initiated. Moreover, a cooperative approach can help preserve the borrower’s relationship with the lender and maintain a better credit profile for future borrowing.
If negotiations with the lender fail, homeowners should seek immediate legal advice regarding their rights and potential defences. Depending on the circumstances, it may be possible to challenge the lender’s calculations, negotiate a redemption plan, or explore insolvency options that prevent enforcement. Each case is fact-specific, and outcomes vary depending on the type of mortgage, the parties involved, and the timing of the default.
Toronto’s housing market is in the midst of a significant re-balancing. The forces that drove years of explosive growth—cheap credit, speculative investment, and relentless demand—have reversed. Rising unemployment, high household debt, and shrinking equity have created a more cautious environment where buyers are selective, lenders are vigilant, and homeowners are vulnerable. The increase in power of sale listings is both a symptom and a catalyst of this shift, reflecting the financial pressures on individual households while simultaneously influencing market dynamics at large.
For now, indicators suggest that power of sales will continue to rise into 2026 as the renewal cycle progresses. Each month that passes brings a new cohort of borrowers face-to-face with higher payments and diminished options. While the system remains stable and Canada’s arrears rate is still low by international standards, the trend underscores the importance of prudent borrowing, early intervention, and sound legal guidance. The recovery, when it arrives, will likely be gradual and uneven, beginning with the stabilization of employment and extending over several years.
Conclusion: Navigating the Legal and Financial Landscape
The current conditions in Toronto’s real estate market serve as a reminder that housing is deeply intertwined with the broader economy and that legal mechanisms such as the power of sale play a crucial role in maintaining balance when borrowers struggle. For homeowners, understanding the process and acting early can mean the difference between preserving equity and facing long-term financial consequences. For buyers, awareness of the legal framework ensures that opportunities are pursued with awareness of the risks. And for lenders, adherence to fair market principles and statutory duties remains essential to maintaining public confidence in the mortgage system.
In a market characterized by high debt levels and rising financial stress, the role of legal professionals becomes increasingly important. Lawyers guide clients through the technical, procedural, and human aspects of mortgage enforcement and help mitigate the losses that homeowners may inevitably face. While no legal strategy can reverse economic trends, informed decision-making and timely advice can reduce the personal impact of those trends on individual households.
Toronto’s housing market is resilient, but it is undergoing a painful correction. As the city works through this period of adjustment, the fundamental principles of fairness, transparency, and responsible lending will remain central. Those facing financial hardship should remember that there are always legal and practical avenues available before matters reach the stage of enforcement. With the right guidance, it is possible to navigate this challenging environment and emerge with financial stability intact.
How We Can Help at Bradshaw & Mancherjee
At Bradshaw & Mancherjee, our real estate lawyers have extensive experience guiding clients through complex mortgage and property matters, including power of sale proceedings, refinancing challenges, and negotiations with lenders. We understand the financial and emotional strain that accompanies the risk of losing a home or investment property, and we approach every case with diligence, discretion, and a deep understanding of Ontario’s mortgage and property laws. Whether you are a homeowner seeking to prevent a power of sale, a lender enforcing your rights, or a buyer navigating a power of sale property purchase, our firm provides the strategic legal advice and practical solutions needed to protect your legal interests and secure the best possible outcome in today’s difficult market conditions.
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