According to Bank of Canada research, these borrowers could see payments jump by around 20%
Canadian mortgage holders are bracing for a pivotal year, with about 1.8 million mortgages set to renew over the next 12 months. As the Bank of Canada’s rate-cutting cycle pauses and the market anticipates further easing, the focus has shifted to how borrowers will manage higher payments after years of historically low rates.
Renewal surge puts spotlight on payment shock
The cohort most exposed are those who locked in five-year fixed rates at the lows of 2020 and 2021. According to Bank of Canada research, these borrowers could see payments jump by around 20%.
“Payment increases will vary depending on mortgage terms, but the vintage of 5-year fixed rate mortgages taken out at the interest-rate lows of 2020/21, are most exposed,” Robert Kavcic, senior economist at BMO, said.
“Bank of Canada work suggests that payment increases will run at around 20% for those holders, and less for others.”
Despite the looming payment shock, industry experts have downplayed the risk of widespread distress. “Most borrowers have been stress-tested at 5.25%, and real incomes are still rising,” Kavcic added.
“With mortgage rates down around the 4% mark, and many mortgage holders working proactively with their lender, the impact of this renewal wave should prove to be manageable.”
Lenders and borrowers adapt to new normal
The Bank of Canada assumes interest rates will evolve according to financial market expectations and that borrowers will renew into similar mortgage products. Lenders have responded by offering more flexible solutions, including extended amortizations and early renewal options.
Meanwhile, Leah Zlatkin, licensed broker and LowestRates.ca expert, said advance planning is an essential part of navigating a renewal process that's become stressful for many owners.
“Many Canadians wait until they receive their lender’s renewal letter to figure out what their new payments will look like. By then, options are limited, and the payment increase can be a huge shock,” she said.
Zlatkin recommends homeowners begin planning four to six months before renewal. Key preparation steps include modelling worst-case scenarios, evaluating cash flow impacts, and gathering necessary documentation early.
“To prepare, calculate what your payments would look like if rates were higher by 15% to 20%, helping you understand the potential increase and how it will affect your budget,” Zlatkin advised.
The mortgage renewal wave comes as the broader Canadian economy faces persistent job market softness and fiscal uncertainty. The unemployment rate is projected to peak at 7.3% by year-end. Meanwhile, the Bank of Canada is expected to cut rates up to 75 basis points through spring 2026, potentially easing some pressure on borrowers.
