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Number of GTA homes being taken over by lenders is skyrocketing

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  Published in House and Home on Wednesday, September 17th 2025 at 10:04 GMT by The Globe and Mail
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GTA’s Home Market in a Tension‑Purge: How Lenders’ Power‑of‑Sale Powers are Redefining Affordability

In a landscape still reverberating from the pandemic‑era housing boom, the Greater Toronto Area’s real‑estate scene has entered a new phase of turbulence. A recent Globe and Mail feature—“GTA homes: lenders, power of sale”—detailed how banks’ ability to trigger a power‑of‑sale (POS) is reshaping the market, influencing prices, and heightening the stakes for both buyers and sellers. The article draws on data from the Canadian Mortgage and Housing Corporation (CMHC), the Bank of Canada, and a host of regional real‑estate reports to present a sobering portrait of a market in flux.

What Is a Power‑of‑Sale, and How Does It Work?

In Canada, the power‑of‑sale is a legal tool that allows a lender—typically a major bank or a credit union—to take control of a property when a borrower defaults on a mortgage. Unlike foreclosure in the U.S., where a court must approve the sale, the Canadian POS process can proceed without judicial intervention. The lender can then place the property on the open market, usually at a price designed to recover the outstanding debt as quickly as possible. While the POS procedure is sometimes described as “lender‑driven,” the article notes that its pace and pricing depend largely on the individual lender’s strategy, the local supply‑and‑demand balance, and the regulatory environment.

The Globe and Mail piece underscores that the POS process is not merely a bureaucratic hurdle; it is a commercial decision that directly affects market prices. When a bank takes a home under POS, it often lists it at a lower price than comparable market listings, sometimes offering “cash‑price” incentives to speed the sale. In doing so, lenders aim to avoid the protracted costs of legal proceedings, storage, and maintenance. However, this practice can compress local price trajectories, especially in areas where supply is already thin.

A Surge in Default and POS Activity

According to CMHC data highlighted in the article, the number of mortgage defaults in Ontario jumped from 8,700 in 2021 to 15,300 in 2023—an almost 75 % increase. The Power‑of‑Sale listings have mirrored that trend: the Globe and Mail’s report cites that the GTA’s POS inventory grew from 2,400 units in early 2021 to more than 5,600 by the end of 2023. The trend is even more pronounced in the Toronto Core, where the number of POS units increased by 120 % over the same period.

One of the most striking points the article emphasizes is the price differential between POS listings and traditional market sales. In Toronto’s most expensive neighbourhoods, POS homes sold at an average of 9 % below comparable market prices in 2023. In lower‑income areas, the gap widened to 14 %. These discounts, the article notes, are not uniform but vary by neighbourhood, property type, and the lender’s urgency.

The Role of Interest‑Rate Hikes and Stress Tests

The backdrop to this surge in defaults is a sharp rise in mortgage interest rates. The Bank of Canada has lifted its policy rate from 1.75 % in early 2021 to 3.75 % as of September 2023—an increase that has pushed many first‑time buyers and existing homeowners into distress. The Globe and Mail article links to a Bank of Canada analysis explaining that the rate hike has reduced the affordability of mortgages across all credit tiers, especially for borrowers with a low credit score or limited down‑payment capital.

The article also cites the stress‑test requirements introduced by the Office of the Superintendent of Financial Institutions (OSFI). While these tests were designed to ensure borrowers could weather a 3‑year rate hike, many homeowners misjudged the durability of their mortgage payment, especially when the Bank of Canada’s policy rate rose again in mid‑2023. The combination of higher rates and the stress test threshold—effectively a 4.5 % cap for low‑income borrowers—has made the market less forgiving.

Lender Strategies: Risk Management vs. Market Impact

An interview with a senior portfolio manager at RBC—shared in the article—illustrates the banks’ internal calculus. The manager explained that the POS is a risk‑mitigation tool: by selling the property sooner, the bank reduces its exposure to a property that might further depreciate due to the market’s downward spiral. “We’re in a scenario where holding a defaulted mortgage is a long‑term capital loss,” the manager said. “We prefer to liquidate assets quickly.”

Yet, the article questions whether this short‑term focus is sustainable. Real‑estate analyst Sarah Kim, whose insights the Globe and Mail references via a link to the Financial Post, warns that a flood of POS listings can depress local home values, ultimately hurting the banks themselves by eroding collateral values. Kim argues that a balance between risk mitigation and market stability is essential, especially in a city with a high concentration of mortgage debt.

Implications for Buyers, Sellers, and Policymakers

For prospective buyers, the article highlights both opportunities and risks. While POS homes can present a chance to acquire a property at a discount, they often come with a litany of “as‑is” conditions—unfinished repairs, unclear title histories, or other encumbrances. The article links to an Ontario government guide on what to check before buying a POS property, emphasizing the importance of thorough due diligence.

Sellers, especially those who have been forced into default, face a bleak prospect: the bank’s offer may be too low to cover their mortgage balance, leading to a negative equity situation. The article notes that more than 60 % of POS sellers in 2023 had negative equity when their homes were sold, reflecting the combined impact of rate hikes and property depreciation.

Policymakers are not blind to the situation. The Globe and Mail cites a recent Ontario Housing Minister’s statement that the province will review foreclosure and POS regulations, exploring whether tighter oversight could moderate the market’s downward trajectory. A linked report from the Toronto Star details a potential “POS transparency act” that would require lenders to disclose the original purchase price, mortgage balance, and the discount offered in the sale, thereby giving buyers more context about the value they are getting.

The Bigger Picture

In the final section, the Globe and Mail article frames the POS trend as a microcosm of the broader Canadian housing crisis. It references a 2022 CMHC report (linked within the article) that argues that rising mortgage debt, coupled with stagnant wage growth, is creating a debt spiral that could erode the stability of the housing market. The article ends with a cautionary note: if the pace of default continues to climb and lenders keep flooding the market with POS properties, Toronto’s once‑stable price levels could see a prolonged slump, affecting not only individual homeowners but also the city’s overall economic vitality.

In sum, the Globe and Mail’s feature on the GTA’s lender‑driven power‑of‑sale phenomenon offers a comprehensive, data‑rich analysis that brings to light a critical yet often under‑reported mechanism in Canada’s mortgage ecosystem. The article, through its references and cross‑links, provides a valuable resource for buyers, sellers, and anyone interested in understanding how the interplay of policy, lender strategy, and market dynamics is reshaping the city’s real‑estate landscape.