A series of rate cuts by the BoC over the past 18 months have brightened the picture for many borrowers
After seeing the first wave of pandemic-era mortgages come up for renewal last year, Canada is facing another renewal surge in 2026 as five-year mortgages terms draw to a close.
A dramatic spike in interest rates in 2022 and 2023 – when the Bank of Canada began hiking aggressively to tackle an inflation crisis – heightened fears that those COVID-era homebuyers, who took advantage of rock-bottom rates in 2020-21, could face sharp pain at renewal time.
Experts even flagged the risk that renewal wave could pose to the Canadian economy. The International Monetary Fund (IMF) described mortgage renewals, along with soaring household debt and cyber and pension oversight shortcomings, among the biggest threats to Canada’s financial system last year.
But some of the alarm surrounding mortgage renewals has eased thanks in part to a flurry of rate cuts by the Bank of Canada in 2024 and 2025, more than halving its benchmark rate and offering some much-needed relief to Canadian borrowers.
Between July 2023 and the start of June 2024, that policy rate – which leads variable mortgage rates and home equity lines of credit (HELOCs) in Canada – hovered at 5%, its highest level for 22 years.
A rate hold this week continued what many observers expect to be a prolonged pause for the central bank. But it cut rates nine times last year and in 2024, meaning many borrowers whose mortgage is up for renewal face a much less severe rate environment than at the height of the BoC’s inflation war.
Last September, Bank of Montreal (BMO) senior economist Robert Kavcic said those cuts meant rate shock would prove “meaningful but manageable” in 2026 for most borrowers, easing further by the middle of 2027.
And TD economist Maria Solovieva also views a better outlook for borrowers than before. “It’s a bit like that ankle injury you got in a dance class or on the field as a teenager,” she wrote last summer.
“It didn’t hurt too much at the time, but years later it still keeps you from sprinting. In economic terms, most mortgage borrowers will manage, but with less financial flexibility.”
Broker sees little to fear in 2026 renewal wave
So far, mortgage brokers – even in Canada’s priciest markets – haven’t reported a jump in renewal pain at the beginning of 2026.
Taz Zaide (pictured top), a Toronto-based broker with 6ix Mortgage Group, told Canadian Mortgage Professional his clients had proven largely resilient when renewal time came around.
About 60% of his company’s business has been renewal-focused since the beginning of the year, he said, with few if any nightmare stories among borrowers.
“All the clients that we’ve had who’ve been up for renewal have basically just been fine with qualification,” he said. “They fit within the guidelines. There’s been no issues on that end.
“Luckily, people coming up for renewal are not cash-strapped or in debt, at least from the portfolio of clients that we have/ They’ve been able to manage and now they’re just renewing regularly without needing to consolidate any money.”
Variable borrowers see further relief from recent years
Variable rate uptake skyrocketed at the onset of the COVID-19 pandemic after the Bank’s decision to slash rates, with their popularity showing no sign of slowing amid reassurances by Bank governor Tiff Macklem that borrowing costs “are going to remain very low for a very long time.”
Borrowers on variable rates with non-fixed payments saw plenty of mortgage turbulence when the Bank suddenly began hiking rates in 2022. But while that shift caused acute pain, it also means those borrowers are actually seeing relief at renewal time with rates having since dipped.
“A lot of people took variable in 2021, back when the rates were 1.5% or so,” Zaide said. “Maybe 70% of people were getting pushed into variable. And then obviously in 2022 and 2023, variable rates rose dramatically.
“These guys were sitting at 5%, 5.5%. Now they’re coming back down to 3% so they don’t really have an issue with affordability, which is my hypothesis as to why it’s been kind of fine at renewal time The majority of people have already seen the worst of it when their rates jumped up to 5%, so now this is kind of a blessing for them to be able to lock into the threes.”
