With economic growth forecast to remain modest, amid elevated downside risks, corporate credits in Canada will remain under pressure in 2026, according to Fitch Ratings.
In a new report, the rating agency said that it has “deteriorating” outlooks for many Canadian sectors in the year ahead, due to the prevalence of macroeconomic headwinds such as ongoing trade tensions with the U.S. and weak consumer spending, which will pose risks to companies’ credit profiles.
Fitch forecasts Canada’s real GDP growth will remain relatively weak over the next couple of years, with growth slowing to 1.6% this year, sliding to 1.1% in 2026, and picking up a bit in 2027 to 1.5%.
“Consumer spending growth will slow to 0.9% as real wage gains remain lacklustre amid significant labour-market slack,” it said.
Additionally, reduced immigration will weigh on population growth, aggregate consumption, and housing demand, it noted — although some of this weakness in consumption will be offset by a rise in investment, bolstered by lower interest rates and improving business sentiment.
“Home price growth will be dampened by unaffordability and economic uncertainty, while mortgage delinquencies are set to rise,” the report said.
With about 60% of outstanding mortgages being renewed this year and next, Fitch said that it’s expected that one‑third of these borrowers will be facing higher mortgage payments by the end of 2026.
As a result, it is forecasting that mortgage arrears will increase slightly to a range of 0.25% to 0.3% in 2026, up from 0.2% this year — although this pain will not be shared equally across the country. It forecasts that Toronto will see its highest delinquency level since 2012 in the year ahead.
“Consumer weakness and macro pressures underpin the ‘deteriorating’ sector outlooks for Canadian banks and pension funds,” the report said.
Fitch expects banks to see impaired loans and net write‑offs rise in the coming year — and, it said that credit loss provisions “will remain elevated for tariff risk.”
Additionally, it expects loan growth to soften, and net interest margins to come under pressure in the second half of 2026 as the effects of asset repricing filters down.
Despite the gloomy outlook, banks’ credit ratings aren’t expected to come under pressure, as they boast “solid financial profiles, healthy asset quality, stable funding and strong capitalization,” Fitch said.
Pension funds’ ratings are expected to remain stable too, as their “long‑term focus, steady captive inflows and strong visibility on outflows underpin stable credit profiles, with exceptionally strong liquidity and low leverage.”
Indeed, Fitch noted that the prevalence of “deteriorating” sector outlooks doesn’t imply widespread rating downgrades, as most individual corporate rating outlooks are stable, “underscoring buffers against macro headwinds.”