Canada’s Mortgage Renewal Wave: What Borrowers Can Expect in 2025–2026

A massive wave of mortgage renewals is set to hit Canada in 2025 and 2026, with about 60% of mortgages coming up for renewal during this period. While many homeowners will face higher monthly payments, especially those with five-year fixed rates, new data from the Bank of Canada (BoC) shows that not everyone will be hit the same way—some may even see a decrease in payments.

Renewals Mean Higher Costs for Many

According to the BoC, borrowers renewing in 2025 may see their mortgage payments rise by an average of 10%, while those renewing in 2026 could face a 6% increase—assuming they stick to the same type and term of mortgage. The steepest hikes are expected for those with five-year fixed-rate mortgages, who represent around 40% of the market. These borrowers could see their monthly payments jump by 15% to 20%.

Not All News is Bad

For some homeowners—particularly those with variable-rate, variable-payment mortgages—the outlook is brighter. As interest rates have started to cool, these borrowers could see their payments fall by 5% to 7%, depending on how rates trend over the coming months.

In total, about a quarter of all Canadian mortgage holders could see lower payments by the end of 2026. Many of them hold short-term fixed-rate mortgages and may benefit from more favourable rates at renewal.

Borrowers with variable-rate, fixed-payment loans will have a wide range of outcomes. Around 10% may face payment jumps of over 40%, while about 25% could see their payments decrease by at least 7%. These differences are largely tied to whether they’ve made extra payments or have dipped into negative amortization—where unpaid interest gets added to the principal balance.

Interestingly, borrowers who signed these types of mortgages before March 2022 have typically paid off principal at three times the required pace. Only 5% of these borrowers had a higher mortgage balance in early 2025 than they did at the start.

Pressure on Budgets for Some

The BoC also projects that homeowners facing higher payments will see their mortgage debt service (MDS) ratio rise significantly—from a median of 15.3% in December 2024 to 18.0% by the end of 2026. For those whose payments are decreasing, the MDS ratio is expected to ease slightly, dropping from 19.7% to 18.6%.

These estimates don’t factor in income growth, but the BoC notes that most borrowers likely earn more now than when their mortgage term began. Tools such as amortization extensions and home equity lines of credit could also help borrowers manage rising costs.

In fact, nearly half of the households expecting payment increases could eliminate the rise altogether by extending their amortization period by five years. And since most borrowers were originally stress-tested at interest rates at least two percentage points higher than their contract rate, many are still operating within a buffer zone.

Overall Outlook: Cautious Optimism

Despite worries about a wave of payment shocks, the BoC’s updated modelling—based on its more accurate RESL2 dataset—suggests that the majority of borrowers will be able to adjust. The dataset provides better insights into real-time balances and payment behaviors, including lump-sum contributions and early amortization changes.

Assuming economic and job market conditions remain steady, the central bank doesn’t expect a dramatic increase in financial hardship.

That said, the BoC did caution that some households may have to tighten their spending or tap into their home equity to manage their mortgage obligations. Still, most are expected to renew at rates lower than the stress-test thresholds they originally qualified under—providing some built-in resilience.

Looking Ahead

As Canada navigates this major mortgage renewal cycle, the key takeaway is this: while higher payments are on the horizon for many, most homeowners are in a strong enough position to adapt—especially with strategic planning and proper advice.

Source: Candyd Mendoza - Mortgage Professional Canada

July 14, 2025