Most Canadians to Face Higher Mortgage Payments at Renewal in 2025–26, Bank of Canada Warns

If you’re a Canadian homeowner with a mortgage set to renew in the next couple of years, brace yourself: chances are your monthly payments are going up. According to a recent analysis from the Bank of Canada, nearly six in ten households will face higher mortgage payments upon renewal in 2025 and 2026. The biggest impact will fall on those locked into fixed-rate deals during the pandemic-era low rates. On the other hand, some variable-rate borrowers may actually see slight relief.

This renewal crunch comes at a time when inflation is still above the Bank’s comfort zone and interest rates, though off their highs, remain significantly higher than five years ago. Let’s unpack what this means for households, why it’s happening, and what steps you can take to prepare.

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What’s Driving the Payment Shock?

The last wave of ultra-low mortgage rates was during 2020–21, when the Bank of Canada slashed policy rates to near zero to support the economy during COVID-19. Millions of Canadians locked in five-year fixed mortgages at rates as low as 1.5% to 2%. Those deals are expiring in 2025 and 2026.

• Bank of Canada estimates: Fixed-rate borrowers may face 15–20% higher monthly payments at renewal. For a household paying $2,000 per month, that could mean an extra $300–$400 monthly.
• Why so steep? Because today’s five-year fixed rates are hovering around 4.5%–5%, more than double what many signed up for in 2020.

Meanwhile, the Bank has kept its policy rate at 2.75% in recent months to manage inflation. This steady stance has kept lenders cautious about cutting mortgage rates too aggressively.

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Variable-Rate Borrowers: A Different Story

Interestingly, those who took on variable-rate mortgages in 2021–22 — and endured painful payment hikes when rates spiked — may now get a bit of relief. As bond yields stabilize and some lenders trim variable offers, the Bank of Canada estimates 5–7% lower monthly payments for these borrowers at renewal.

For example:

• A household paying $2,500 today might see that drop to around $2,325.
• While not dramatic, it’s a reversal of the pressure variable-rate holders have felt over the past two years.

Still, experts caution that variable mortgages remain volatile, and any shift in Bank of Canada policy could change the picture quickly.

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Who Will Feel It the Most?

The pain won’t be evenly distributed.

• First-time buyers (2020–21 cohort): Households that stretched to buy during the pandemic at record-low rates are the most exposed. Many will renew into double the cost, straining affordability.
• Middle-class families: Those with mortgages in the $500,000–$700,000 range may face the largest dollar increases, especially in expensive markets like Toronto and Vancouver.
• Rural/secondary markets: Even in smaller towns, where mortgages are lower, the relative jump of 15–20% can hit disposable income hard.

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Practical Steps for Homeowners

1. Start the Renewal Conversation Early

Don’t wait until your term expires. Contact your lender or broker 4–6 months before renewal. Early shopping can lock in rates if bond yields rise further.

2. Compare Across Lenders

Loyalty doesn’t always pay. A competing bank or credit union may offer better terms, cash-back perks, or features like prepayment flexibility.

3. Explore Blended or Extended Terms

Some lenders let you blend your current rate with today’s to soften the shock, or extend amortization to lower payments. This stretches repayment but may ease short-term pressure.

4. Revisit Your Budget

With groceries, fuel, and childcare already expensive, adding $300–$400 more in housing costs is tough. Reassess discretionary spending or consider refinancing unsecured debt into your mortgage if it lowers the total burden.

5. Consider Professional Advice

Mortgage brokers and financial planners can run scenarios for you, showing the trade-offs between fixed vs variable, or whether a refinance makes sense.

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The Bigger Picture

Canada’s mortgage renewal crunch has broader implications:

• Consumer spending: Higher mortgage bills mean less money for restaurants, travel, and retail. This could slow down the economy.
• Housing market dynamics: More households stretched thin could lead to higher listings if people choose to downsize or sell.
• Financial stability: The Bank of Canada is monitoring closely. Its July staff paper warned that mortgage renewals could keep household financial stress elevated through 2026.

At the same time, the fact that variable borrowers might see relief is a reminder that not all households will feel the same pressure.

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Why This News Matters

Housing affordability is already one of Canada’s biggest economic debates. With 60% of mortgages renewing over the next two years, the cost shock could affect millions of households. Understanding the landscape — and preparing for it — is the best way for homeowners to weather the storm.

Whether you’re in Toronto, Vancouver, or a small town in Manitoba, if your mortgage is coming up for renewal soon, now is the time to prepare. Acting early could be the difference between financial strain and financial stability.