Bank of Canada says 60% of renewing mortgages in 2025–26 will see higher monthly payments
Up to 20 percent increases in monthly payments could hit five-year, fixed-rate mortgage holders renewing in 2026—marking the steepest average jump among mortgage types, according to the Bank of Canada’s latest staff analytical note.
The bank projects that 60 percent of mortgage holders renewing in 2025 and 2026 will face higher payments compared to December 2024 levels.
Despite recent rate declines, the bulk of these borrowers—many of whom signed during periods of low interest—will still see payment increases.
For those renewing in 2025, the average payment is projected to rise 10 percent. The average increase moderates to 6 percent for 2026.
Around 75 percent of those facing increases hold five-year, fixed-rate mortgages. This cohort represents about 40 percent of all Canadian mortgage holders.
The bank’s analysis uses a new dataset, RESL2, which captures monthly balances for all outstanding mortgages at federally regulated institutions.
It provides a more accurate picture than the previous version (RESL1), which only tracked mortgages at origination and renewal.
Not all borrowers will see increases. Roughly one-quarter of mortgage holders are expected to see payment reductions by the end of 2026.
Most of these borrowers hold short-term, fixed-rate mortgages.
For variable-rate borrowers, the impact depends on structure. Those with variable payments could see average decreases of 5 to 7 percent.
But those with fixed payments could face a wide range of outcomes—10 percent may see increases exceeding 40 percent, while 25 percent may experience drops of at least 7 percent.
These variations are largely tied to principal repayments made since origination.
Among borrowers with variable-rate, fixed-payment mortgages originated or renewed before March 2022, about 80 percent repaid more than required, reducing their outstanding principal.
Only 5 percent had higher balances in February 2025 than when they started, compared to the 25 percent projected if only minimum payments were made.
The bank estimates that about one-third of all mortgage holders will face payment increases by the end of 2026.
At the same time, borrowers with payment increases are expected to see the median mortgage debt service (MDS) ratio climb by 2.7 percentage points—from 15.3 percent in December 2024 to 18 percent in 2026.
Those with payment decreases could see the median MDS drop by 1.1 percentage points to 18.6 percent.
While some households may struggle, most are expected to have higher incomes since their last renewal. The bank notes that many will have options to manage increased payments.
About half of those with higher payments could eliminate the increase by extending amortization by five years. Others may access home equity to ease the cash flow burden.
The findings assume that borrowers renew into the same type of mortgage they already had, and that interest rates follow market expectations.
The bank states that while some may face challenges, severe financial stress is not expected for the majority
