60% of Mortgages Set to Renew in 2025‑26 — Financial Stability at Risk?

A Wave of Renewals on the Horizon

The Bank of Canada (BoC) and OSFI are sounding alarms as approximately 60% of Canada’s outstanding mortgages—about $1.32 trillion—are due for renewal by end of 2026. These renewals stem largely from mortgages initiated during the pandemic’s low-rate era (2020–21), when many Canadians locked in historically cheap five-year fixed rates near 1–2%.

Those borrowers now face the prospect of renewing at much higher rates, which could translate to steep increases in monthly payments and financial stress.

Payment Shock, Not Just Theory

New data reveals many of these renewals—estimated at 40% of all outstanding mortgages—will carry higher rates, affecting around 792 billion CAD in loans . Given today’s average rates near 4%–5%, some homeowners are already being hit by 20%–40% payment increases at renewal .

This “payment shock” isn’t just theoretical: household budgets are tightening as borrowers brace for sharper mortgage expenses.

Stress Points for Households

Borrowers renewing now will likely face:

• A shift from sub‑2% to 4%+, adding hundreds of dollars monthly
• Lower-budget households may need to cut spending or dip into savings
• Those in trade‑sensitive sectors could struggle more amid job uncertainty and rate hikes

While many homeowners built up equity or saved during the low-rate era, narrower margins could still force difficult financial choices.

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Mortgage Structure Under Scrutiny

Canada’s typical 5-year fixed mortgage model increases households’ exposure to rate resets, unlike long-term U.S. fixed-rate loans. OSFI and the BoC argue that this structure hasn’t caused major instability yet, but magnifies refinancing risk during rate cycles

Senior Deputy Governor Carolyn Rogers cautioned that high renewal volume paired with increased rates could lead households to curb spending or, in severe cases, create liquidity pressures

Financial System on Guard

Despite the looming renewal wave, regulators confirm that Canada’s banking sector remains robust. OSFI emphasizes that large banks hold solid capital buffers and are stress-testing portfolios against rate volatility .

Still, the risk picture varies: smaller banks and credit unions, which often serve higher‑risk borrowers, are showing early signs of strain

OSFI projects that if mortgage arrears escalate, some lenders may tighten lending conditions—potentially limiting credit and dampening home sales

OSFI’s Strategic Response

In response, OSFI is:

• Increasing liquidity oversight for major banks
• Stress testing large mortgage books against rate and employment shocks
• Urging lenders to monitor high-debt households and offer proactive assistance

These defensive steps aim to ensure financial resilience even if renewable mortgages spike.

Policy Debate: Restructure or Adapt?

Calls to adopt a U.S.-style 30-year fixed mortgage model have resurfaced. But the BoC maintains Canada’s short-term renewal system fosters discipline, keeping defaults relatively low .

The priority, according to regulators, is not structural overhaul, but managing the upcoming renewal wave carefully, with strong consumer protections and clear communication.

What Borrowers Should Do

• Check renewal dates and compare options early
• Review affordability with higher projected rates
• Consider switching lenders for better deals—lender flexibility grew after regulatory updates last year

Proactive planning now could ease renewal pressure significantly.

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Long-Term Outlook

Canada’s housing and banking system is tested, but current resilience indicates stability. The next risk window centers on 2025–26 renewal dynamics—how borrowers, lenders, and policy makers respond could define market health for years.

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📊 Fast Facts

Metric	Value / Insight
Share of mortgages renewing by 2026	~60%
Share of renewals facing higher rates	~60% of renewals
Approx. outstanding renewals at risk	~B$792
Households hitting payment shock	20–40% increase
Variable-rate mortgages in negative amortization	~12%

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Final Word

The dual forces of mass renewals and rising rates present a key stress point for Canada’s financial health. But strong regulatory oversight, sound bank buffers, and proactive consumer strategy may well prevent a crisis. For now, the watchwords are prepare early, plan smart, and stay informed.