Posted originally on Jul 18, 2025 by Martin Armstrong 

Canadians with a mortgage renewal in the near future are facing trouble ahead. The Bank of Canada released a new report detailing that around 60% of outstanding mortgages are set to renew in 2025 or 2026, and those homeowners are highly likely to see a rise in monthly payments.

Most borrowers went into a five-year, fixed-rate mortgage when rates were significantly lower. The average monthly mortgage payment for those renewing in 2025 is expected to rise by 10% compared to December 2024. Those set to renew in 2026 should anticipate a 6% monthly increase in comparison to the same time period. However, this is all dependent upon the type of product purchased. The central bank noted that those who selected a variable rate payment may actually see a decline of between 5% to 7%. Those with a five-year, fixed-rate payment could see an increase of up to 15% to 20%. Of the 60% of mortgage holders facing renewals, around 75% of those facing increases hold a five-year, fixed-rate mortgage.

Five-year, fixed-rate mortgages account for 40% of all outstanding mortgages in the nation. The central bank’s report notes that 20% of these holders with mortgages renewing in 2026 will experience an increase.

The variable rate surpassed its peak years ago, but the renewal rates vary drastically. At the top, 10% of those renewing in 2026 could experience an increase of over 40%, while at the bottom, around 25% may see a decrease of at least 7%. Principal payments made since origination is one of the primary factors. Those who chose or had the ability to increase monthly payments to cover principal and interest are less likely to experience a dramatic price increase at renewal compared to those in negative amortization. These loans face rising interest that is added to the principal when the monthly payment is unable to meet the initial interest.

Around 80% of those with variable loans who renewed prior to March 2022 have repaid beyond their contract, leading to only 5% of that group holding a higher principal balance in February 2025 compared to the previous renewal or origination.

The central bank has deemed that this will not cause severe stress to the Canadian economy. Yet, the central bank is counting on borrowers having a higher income at renewal.

“Overall, we do not expect upcoming mortgage renewals to lead to a severe worsening of financial stress for affected borrowers, holding everything else constant. Indeed, most borrowers will likely have higher income at renewal and should face interest rates below what they were stress-tested for. That said, some borrowers with higher payments at renewal will face challenges. Many of them will need to change their spending to manage higher mortgage payments. And some may struggle to meet their other financial obligations.”

This is an optimistic analysis that relies on the economy strengthening at a time when the indicators are not there. Households cannot necessarily absorb these rate hikes, as we are looking at around 60% of renewals experiencing an uptick in monthly payments. The models show rising tension across Canadian banks and mortgage-backed assets into Q1 2026. This is not about a bubble bursting. It’s about a slow, structural compression.