Homeowners seem far from panic mode on mortgage renewals despite higher rates

Canada’s mortgage renewal wave has been one of the most discussed industry trends of 2025 and 2026 to date, with plenty of ink spilled over the challenges faced by borrowers renewing their mortgages at much higher costs than their original, pandemic-era contract.

That reality is proving a conundrum for some homeowners whose budgets were already squeezed even before their monthly payments shot up at renewal time. But for the most part, what many saw as a looming crisis hasn’t been as bad as first feared – and borrowers are largely coping with the strain of steeper payments, according to an Ontario-based broker.

Michelle Campbell of Mortgage Architects – A Better Way told Canadian Mortgage Professional many homeowners had already anticipated the likelihood of a jump in payments and taken proactive steps to speak with a broker about that prospect well before renewal time.

That means the current renewal landscape is less a full-blown crisis, she said, than a reality that most borrowers are able to navigate when they sit down and crunch the numbers with a mortgage professional.

“Once we actually sit down and go through the options, most people realize that they have a lot more flexibility than they first thought,” she said.

But for those homeowners who leave it until the last minute to discuss their options, the conversation and decision-making process can feel less reassuring and more chaotic.

“The biggest difference I’m seeing is timing. The clients that are engaging really early feel way more in control,” she said. “And there are some that are waiting until the last minute and then they’re feeling overwhelmed. So I’ve made it a priority to reach out well ahead of renewals – six to nine months in advance.”

Renewal picture brightens after early alarm

During the COVID-19 pandemic, mortgage rates plunged when the Bank of Canada slashed its policy rate and five-year Government of Canada bond yields nosedived. A flood of Canadians entered the housing market as a result, snagging mortgages at rock-bottom rates sometimes below 2%.

But speculation around a possible mortgage renewal crisis or “cliff” ramped up when the central bank began hiking interest rates in 2022 and bond yields surged after inflation ballooned.

That stirred fears that holders of five-year fixed-rate mortgages taken out in 2020 or 2021, when rates were at their lowest, could face an unmanageable leap in monthly payments by the time renewal arrived in 2025 or 2026.

The reality, though, has proven less severe – for now. The Bank began moving interest rates lower in 2024, introducing a flurry of cuts amid some signs of a weakening economy and moderating inflation, and that’s brightened the picture slightly for homeowners facing a cost crunch.

Stress test an important part of stable renewal picture

Campbell also emphasized that most borrowers coming up for renewal today have paid a significant portion of their principal over the past term, frequently while advancing in their own careers.

“If you really think about it, you’ve paid down your mortgage in those five years or three years and your income has likely gone up. And we’ve already stress tested those individuals,” she said.

That stress test, which requires borrowers to prove they can meet a rate of either 5.25% or two points above their contract rate – whichever is higher – has proven an invaluable way of helping to reassure homeowners they can manage higher payments, according to Campbell.

That’s not to say there’s no pain, and brokers and borrowers alike will be keeping a close eye on the Bank of Canada’s approach – and the direction of bond yields – to see where rates could be headed in the months ahead.

The eruption of conflict in Iran has raised the risk of another inflation upsurge, potentially forcing the central bank to move rates higher and putting upward pressure on bond yields.

For now, though, Campbell said she isn’t seeing the level of distress that some feared on the renewal front. “There is some concern for sure,” she said, “but I wouldn’t say that it’s panic from what I’m seeing.”

Source CMP
By Fergal McAlinden