Residential Mortgage 'Survival Guide' - Updated for Q2/26

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Residential Mortgage 'Survival Guide' - Updated for Q2/26

seventh-straight quarter (+2% y/y), reflecting 4,000its continued focus on profitable growth. This rate cut cycle has not translated into a 3,000 9876543210 Dec Jun Dec Jun

meaningful re-acceleration in mortgage growth. We expect a modest improvement LHS: Price / RHS: Volume (mm) Source: FactSet

in RESL growth through 2026, with downside risk from renewed trade/geopolitical

uncertainty and/or unemployment above BMO Economics' forecasts (Exhibit 20).

2) Banks are well-reserved despite rising delinquencies and decade-high LTVs.

Mortgage arrears (90+ day delinquency rate) in Canada now exceed pre-pandemic

levels (higher in Ontario), although remain low by historical measures (Exhibits 13

and 14). While still considered at healthy levels, average LTVs on uninsured mortgages

increased to ~60% in Q2/26, the highest levels we've seen in a decade (Exhibit

4). Although delinquencies and LTVs continue to drift higher, bank management

teams emphasize the credit quality of their mortgage portfolios on the back of strong

underwriting standards (Exhibit 11) and consumer resiliency. Conservative provisioning

has lifted ACL coverage ratios to roughly 2x pre-pandemic levels, suggesting banks are

well-reserved despite rising delinquencies (Exhibits 15 and 16).

3) Upcoming mortgage renewals could be a NIM tailwind. ~$418B of fixed rate

mortgages at the “Big 6” (~27% of total balances) are set to renew in H2/26 and 2027

(Exhibits 9 and 10). While this likely translates into increased monthly payments,

downside protection is provided by aforementioned robust underwriting processes,

which stress tests borrowers' affordability. This renewal wave could support RESL NIM

at the “Big 5” (excl.