The heaviest year of Canada’s mortgage renewal cycle is coming into view, and it will test borrowers and bank balance sheets in equal measure.
Industry and central bank analyses point to roughly 1.8 to 1.9 million mortgages renewing into mid-2026, with the crest expected in the first half of the year as five-year terms originated at the depths of the pandemic roll over.
In early 2021, many variable and five-year fixed loans were issued below 2%. Today, renewal offers cluster in the low-4% range, trimming the shock from last year but still raising monthly carrying costs for a large slice of households.
BMO Economics estimates about 1.8 million renewals over the next year with a peak in June 2026, adding that rates then were “the lowest-of-low.”
A Bank of Canada staff analysis calculates that about 60% of mortgage holders renewing in 2025 and 2026 will see payment increases relative to December 2024.
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The biggest jumps are expected among borrowers coming off five-year fixed contracts, while some variable-rate borrowers see relief as policy rates ease.
The central bank’s researchers estimate average payment increases of roughly 15% to 20% for five-year fixed borrowers renewing in 2026, although outcomes vary by product and borrower profile.
Market rates have fallen from 2023 highs, and spreads on shorter-term fixed deals have pulled quoted mortgage rates toward the 4% handle. TD Economics models a typical 2020 borrower renewing near 4.0% and facing a manageable payment step-up.
BMO’s economists similarly flag variable rates in the low-4% range and three-year fixed offers below 4% this fall.
The Bank of Canada’s 2% inflation goal remains the anchor for rate-cut hopes next year. At the same time, supervisors are sharpening their focus.
The federal banking regulator OSFI has warned that renewal-driven payment shock is a key financial-stability risk and said it is closely monitoring expected credit loss provisioning, particularly at smaller and mid-sized institutions.
Canada’s largest lender, Royal Bank of Canada, reported third-quarter provisions for credit losses of C$881 million, up from C$659 million a year earlier, and noted slightly higher mortgage allowances.
While impairments remain low by historical standards, the direction underscores how lenders are padding buffers ahead of 2026. OSFI’s latest semi-annual risk update adds a macro layer to that caution.
With a weaker growth outlook and lingering housing pressures, the regulator said credit risk could rise as collateral values and borrower resilience are tested.
That guidance complements the Bank of Canada’s Financial Stability Report, which observed that banks have maintained strong capital and increased provisions through 2025.
Balance sheets on the household side are not all fragile, aggregate Canadian household net worth has risen since the pandemic, equity markets are higher, and the mortgage stress test created a cushion between current contract rates and the rates used to qualify many borrowers in 2020 and 2021. Those buffers will help, but they are uneven.
Investors with rental properties financed at the lows will feel cash-flow pressure if rents or vacancy rates move the wrong way.
Funding conditions also bear watching as repo market strains periodically flash during quantitative tightening cycles.
