Refinancing Wave Fuels Mortgage Activity Even as Canada’s Housing Market Stalls

Toronto | 29 November 2025 —

Canada’s mortgage market is seeing an unexpected uptick in activity this quarter, but not because homes are flying off the shelf. Instead, a wave of refinancing is powering mortgage originations, even as the broader housing market continues to show signs of fatigue.

Refinancing Is Driving the Momentum

A new update from Investment Executive highlights that lenders across the country are reporting stronger refinancing volumes. With fixed mortgage rates recently dropping into the mid-3% range and variable rates becoming more appealing after the Bank of Canada’s two policy rate cuts, homeowners are seizing the opportunity to restructure their debt.

Refinances are significantly outpacing purchase-related originations, marking a reversal from the frenzied buyer demand seen during the pandemic years. Many borrowers are:

• Locking in lower fixed rates after two BoC cuts brought the overnight rate to 2.25%.
• Switching lenders to secure better terms.
• Extending amortizations to ease payment pressure at renewal.
• Consolidating higher-interest debt accumulated during the inflation spike of 2022–2024.

Lenders say this is the most refinance-heavy quarter since early 2020.

Housing Market Still Sluggish

While refinancing is running hot, new purchase activity remains subdued.
Home sales in major markets like Toronto, Vancouver, and Calgary continue to lag, partly due to:

• Affordability pressures that never fully normalized after pandemic-era price increases.
• Uncertainty around employment, with national unemployment hovering just under 7%.
• A larger share of potential buyers choosing to “wait and see” if 2026 brings further rate cuts.

Despite lower borrowing costs, buyer sentiment has not fully shifted into recovery mode.

Why Homeowners Are Refinancing Now

Homeowners who originally secured mortgages at higher rates in 2022–2023 are now finding significant savings by refinancing — in some cases shaving $250 to $600 per month off payments depending on loan size and amortization choices.

Key motivations include:

• Breaking early to avoid steep renewal shocks forecast for 2026.
• Resetting variable-rate mortgages that have seen fluctuating payments for two years.
• Leveraging equity as many properties remain above pre-2020 valuations despite price cooling.

Mortgage brokers report that clients are highly rate-sensitive and increasingly proactive compared to last year.

What Borrowers Should Watch

Experts caution that refinancing isn’t one-size-fits-all. Borrowers need to consider:

• Prepayment penalties on fixed loans.
• Qualification stress tests, which remain based on whichever is higher: the contract rate + 2% or the minimum qualifying rate.
• Refinance caps, as most lenders will only allow refinancing up to 80% LTV.
• Job stability, which is becoming a friction point in approval timelines.

Still, the incentive is strong: mortgage rates are meaningfully lower today compared to the peak of the tightening cycle.

Analysts expect refinancing to remain a major storyline through early 2026, especially with 60% of Canadian mortgages coming up for renewal in 2025–26. If rates hold steady or fall further next year, refinancing will continue to offer homeowners a critical financial reset button.