06:53 AM EDT, 06/13/2025 (MT Newswires) -- Canada's household mortgage debt service ratio held steady at 7.9% in Q1 and is down slightly from above 8% in mid-2023, said Bank of Montreal (BMO).

This is good news and continues to suggest that the worst concerns surrounding the wave of renewals were overdone, noted the bank.

However, below the surface, Canadians are paying "significantly" more in interest, and paying down much less principal, stated BMO. The interest portion of the debt service ratio is still above 5%, accounting for roughly two-thirds of mortgage payments.

That's consistent with levels last seen before the financial crisis, pointed out the bank.

During the era of ultra-low interest rates, Canadians were carving down principal at a fast rate, but current neutral rates suggest that era is over, added BMO. Households are now building equity at a much slower clip.

Investors have also been crowded out by this shift. During the low-rate era, investors could overlook some negative cash flow because equity was still getting built up below the surface -- that no longer applies.

Until cash flow dynamics improve -- and Canada isn't there yet -- the investor will remain absent from the market, according to BMO.