TD Bank’s latest quarterly earnings report reveals a significant trend in the Canadian housing market: its residential mortgage portfolio shrank in the second quarter of 2025. This slowdown in one of the country’s largest lenders offers a clear window into the pressures facing both banks and consumers in a high-interest rate environment.
The bank’s Canadian residential mortgage portfolio fell to $267.4 billion, down from $270.9 billion in the previous quarter. For potential homebuyers and existing homeowners, this news signals a market in transition. Let’s break down what’s happening and why it matters.
A Cooling Spring Market and Cautious Buyers
Despite expectations for a busy spring season, the Canadian real estate market remained subdued. According to TD’s report, persistent uncertainty is weighing heavily on homebuyer sentiment.
Sona Mehta, TD’s Group Head of Canadian Personal Banking, noted that while the bank anticipated a stronger market, “a lot has changed in the last four months.” The key factors driving this slowdown include:
- Elevated Interest Rates: High borrowing costs continue to sideline potential buyers and limit purchasing power.
- Cautious Consumer Sentiment: Economic uncertainty is causing many to pause their homebuying plans.
- Moderation in Broker-Sourced Mortgages: Originations from the mortgage broker channel, a key source of new loans, were softer this quarter.
Interestingly, while the broker channel saw a dip, TD’s own proprietary channels, like its in-branch and Mobile Mortgage Specialist (MMS) teams, saw originations jump by double digits, indicating a strategic focus on its existing customer base.
The Strategy Shift: A Focus on Quality over Quantity
In response to the market slowdown, TD is not chasing growth at any cost. The bank emphasized a focus on “quality business” and profitability. This means being more selective about the loans it approves and competing where it can win on “speed and customer experience” rather than just on rate.
This shift was also reflected in an increase in mortgage paydowns, as clients with strong financial footing used year-end bonuses and personal savings to reduce their mortgage balances.
The $144 Billion Mortgage Renewal Wave on the Horizon
One of the most critical takeaways from the report is the sheer volume of mortgages approaching renewal. TD revealed that $144 billion in mortgage balances—representing about 40% of its entire mortgage book—are scheduled to renew by the end of 2026.
The vast majority of these are fixed-rate loans that were secured at much lower rates. As these homeowners face renewal, they will be transitioning to significantly higher interest rates, placing further pressure on household finances across Canada. This mortgage renewal wave is a major event to watch.
Key Takeaways for Canadian Homeowners and Buyers
- For Buyers: A less frenzied market can mean more negotiating power and less competition. However, securing financing remains challenging, so getting pre-approved is more important than ever.
- For Existing Homeowners: If your mortgage is renewing in the next 18 months, start planning now. The rate environment has changed dramatically.
- Channel Matters: TD’s results show a focus on its direct channels. When shopping for a mortgage, exploring options directly from a bank’s specialists, in addition to mortgage brokers, can provide different results.
- The Market is Stable, But Cautious: While loan volumes are down, TD also reported that its credit quality remains strong, with provisions for credit losses declining. This indicates a stable, albeit cautious, lending environment.
In conclusion, TD’s latest earnings provide a clear signal that the Canadian housing market is still adapting to the new reality of higher interest rates.