What to expect from Canada's 2026 mortgage renewal wave

Canada’s housing market took off like a rocket in 2020 and 2021, when a perfect storm of factors coincided to send homebuying and refinance activity through the roof.

The Bank of Canada slashed its benchmark rate to near-rock-bottom lows in March of 2020, bringing borrowing costs dramatically lower amid fears of a huge economic crisis as the COVID-19 pandemic took hold.

Meanwhile, household savings swelled as stay-at-home orders, travel restrictions and other public health measures sent monthly spending lower.

And plenty of Canadians packed up their tiny condo units in the city and headed for the suburbs or further afield, convinced that remote working arrangements were here to stay and now was the time to realize their ambition of owning a home with a garden.

Those years offered homebuyers the chance to take out a mortgage at huge discounts, buoyed by Bank of Canada governor Tiff Macklem’s reassurance that low rates were here to stay.

But scores of those five-year mortgages have come up for renewal in 2025, presenting challenges for borrowers now faced with much higher rates than their original contract – and another wave of renewals is on the way in 2026.

More than 2 million mortgages set to renew before 2028

About 1.15 million mortgages will renew next year, according to Canada Mortgage and Housing Corporation (CMHC), with a further 940,000 scheduled for 2027.

That raised concerns about a potential spike in mortgage delinquencies and borrower strain as households struggled to absorb the shock of higher rates or payments – but for now, there seems little chance of a widespread crisis.

That’s partly because while the Bank of Canada’s policy rate is still well above the level of 0.25% seen at the height of the pandemic, the central bank has trimmed rates considerably since the middle of last year – by a full 275 points, from 5% to 2.25%.

The Bank started a flurry of cuts in 2024 as unease grew about Canada’s economic outlook and the prospect of a downturn.

“I guess it’s one of the silver linings of the weak macro situation and international events, that interest rates are a bit lower than where we were expecting,” Aled ab Iorwerth (pictured top), deputy chief economist at CMHC, told Canadian Mortgage Professional.

“Yes, [borrowers] will be renewing at higher rates – but nowhere close to where we might have been predicting or worrying about, say, a couple of years ago.”

Top banks not panicking over renewal spike

 Leading lenders are also taking a measured approach to the renewal surge. In July, TD economist Maria Solovieva outlined her expectations for the flood of renewals in 2025 and 2026, indicating that “pain will linger” from higher rates, but chances of a wider systemic shock seem remote.

She highlighted that aggregate mortgage payments in Canada were actually declining – principally because of those sliding interest rates, and because high-balance mortgages contribute more heavily to the national average than lower ones.

Meanwhile, the 2026 market will also see plenty of renewals among borrowers who took out their mortgages in 2022 or after the onset of the Bank of Canada’s rate-hiking cycle, meaning their rates will likely move lower next year.

And even though about 40% of 2020-21 borrowers renewing mortgages will face higher rates, Solovieva said plenty within that cohort have also seen their own circumstances improve – because many now have higher home equity, higher salaries and savings, and better average personal disposable income.

“These facts suggest that many homeowners have some flexibility to temper the increase in their monthly payment – whether it’s through extending the amortization, refinancing, or pre-paying,” she wrote.

n short: “most mortgage borrowers will manage, but with less financial flexibility,” she said. CMHC has also pointed out an uptick in various types of non-mortgage debt, even if it’s not expected to trigger a full-blown crisis.

“We’re continuing to monitor some of the other credits, and they do seem to be edging up slightly,” ab Iorwerth said. “Auto [delinquencies] are coming down but then you have the line of credit, credit cards, that sort of stuff going up.

“Clearly there’s a bit of stress out there, but we’re not at the stage of those having a systemic impact at the moment.”

Source: Canadian Mortgage Professional