Co-signed mortgages rose to 11% of first-time loans in 2025. The Bank of Canada flagged the jump as concentrated in Toronto and Vancouver.
What the Bank of Canada found
The Bank of Canada’s analysis shows a noticeable increase in parents co-signing mortgages for adult children. Of all mortgages issued to first-time buyers, those with parent co-signers climbed from roughly 4 per cent in 2004 to about 11 per cent in 2025. The central bank’s report singled out Canada’s priciest markets — Toronto and Vancouver — as hot spots where co-signing is most common.
That’s a huge change over twenty years. The rise isn’t uniform across the country, but where housing costs are highest, parental backing has become a common route to home ownership.
The report also dug into who uses co-signers. It’s more frequent for younger first-time buyers, and for applicants with lower incomes and weaker credit scores. In many cases, the parent’s involvement is the difference between getting a mortgage and being turned down.
How much extra buying power?
Co-signing dramatically widens what a buyer can afford. In 2022, the Bank of Canada’s analysis estimated that the average adult who had a parent co-sign would have qualified for a home worth C$458,000 without that help. With a parent on the mortgage, the same buyer could, on average, afford a property valued at C$787,000 — a purchasing power boost of about 72 per cent.
Those numbers show why families turn to co-signing. It can move someone from the sidelines into the market, especially when house prices are high relative to incomes. But it’s not free money; it’s effectively parents taking on responsibility for a larger loan.
Who bears the risk?
Co-signing shifts risk from lenders to families. When a parent co-signs, they’re legally responsible for the mortgage if the borrower stops paying. The Bank of Canada stressed that in around 74 per cent of co-signed cases the buyer wouldn’t have qualified on their own — so the parent’s finances end up shaping the loan’s size and terms.
Both parties face greater risks. Young buyers may end up with larger mortgages than their income would comfortably cover. And parents put their savings, their credit, and sometimes their retirement plans on the line to make that mortgage possible.
That exposure can become a problem if either party faces a sudden shock — a job loss, illness, or a market downturn. The central bank warned that rising reliance on co-signing could be an emerging vulnerability for the broader financial system, because trouble for family borrowers can ripple outward to lenders and guarantors.
Why families choose this route
There are a few familiar reasons families use co-signers. First: down payments. Even buyers with a down payment may fall short of mortgage qualification thresholds because lenders test borrowers’ ability to carry monthly costs. Second: credit history. Young people who haven’t had time to build credit often face higher interest costs or rejection. Third: housing prices. When list prices are out of reach, a parent’s income or assets make larger loans possible.
For many, co-signing is a conscious trade-off. Parents see it as a way to help children build equity rather than spend on rent. Buyers view it as their path to an affordable monthly payment and a foothold in an expensive market.
Alternatives and legal realities
Co-signing isn’t the only option. Some families opt for gifted down payments, registered first-time home buyer incentives, or lesser-known guarantor arrangements with lender-specific rules. But each choice has legal and tax implications that families should understand before deciding.
Legal experts say the clearest danger is misreading the fine print. A co-signer is often on the hook for repayments and can see their credit score affected by missed or late payments. In some arrangements, the co-signer has no automatic claim on the property despite being responsible for the mortgage — a detail that catches some families off guard.
What lenders and regulators might do
The Bank of Canada’s note about a potential system vulnerability suggests regulators will keep an eye on trends. Lenders already have underwriting rules to test ability to repay, but co-signing changes that calculation because it brings a second set of finances into play.
Financial institutions might tighten rules on co-signed loans, change stress tests, or require better proof of household risks. At the same time, policymakers might examine whether current consumer protections adequately explain the risks to co-signers.
Practical steps for families
Families thinking about co-signing should walk through clear steps: run detailed affordability scenarios, understand the legal wording of the mortgage agreement, and talk to a mortgage specialist or lawyer. It’s also wise to document any private arrangements — for instance, whether the co-signer expects title rights, or is simply guaranteeing payments.
Families often face emotional challenges, even with careful planning. Financial stress between parents and adult children can spill into personal relationships. That’s another reason to get everything on paper before anyone signs.
Broader housing context
Canada’s long-running affordability squeeze helps explain the trend. High demand, limited supply, and strong price appreciation in major cities have pushed buyers to seek creative solutions. Co-signing is one of them, and the Bank of Canada’s figures show it’s growing fast enough to change how first-time buyers approach the market.
Still, co-signing doesn’t solve the core affordability problem. It redistributes risk within families rather than reducing the underlying mismatch between wages and home prices.
What to watch next
Policy watchers will watch whether co-signing continues to climb and whether lenders alter underwriting practices. The central bank has already raised the issue as a possible vulnerability; if the trend accelerates, regulators and lawmakers could pick up the pace on consumer protections and disclosure requirements.
For now, the shift toward family-backed mortgages is a window into how Canadians are adapting to a tough housing market — and the trade-offs they’re willing to make.
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The Bank of Canada found that in 74 per cent of cases with a parent co-signer, the adult borrower wouldn't have qualified for the mortgage without that parent.
This article was created with AI assistance.
