The Mortgage Renewal Wave of 2025–26: What Canadian Homeowners Really Need to Know
A Known Shift, Not a Sudden Crisis
Roughly 60 percent of Canadian mortgages are set to renew by the end of 2026, a figure confirmed by the Bank of Canada. This is the highest volume of mortgage renewals ever seen in such a concentrated timeframe. While this statistic has been widely cited in media and social commentary to raise concern, it's important to understand both the structure and the behavior underlying this moment.
This is not a shock event. It has been a visible and predictable outcome of the 2020–2021 mortgage boom, triggered by the Bank of Canada's emergency rate cuts and quantitative easing in response to the COVID-19 crisis. At that time, both fixed and variable mortgage rates dropped below 2 percent.
These extraordinary financial conditions created two primary behaviors: a historic surge in new mortgage originations and a parallel wave of refinancing. Many homeowners either entered the market for the first time or restructured their loans to lock in ultra-low rates. This concentrated a significant portion of the national mortgage book into a narrow renewal window of 2025 and 2026.
How We Got Here: The Mechanics Behind the Renewal Wave
Mortgage Originations Reached Record Levels
According to CMHC, 2021 was the largest year for mortgage origination in Canadian history. Purchases and refinances soared as buyers took advantage of record-low interest rates. Most of those borrowers took 5-year fixed or variable mortgages, placing their renewal squarely into 2026.
However, it's important to clarify that not everyone with a mortgage from 2021 was a new buyer. Many borrowers who originally purchased in earlier years — such as 2010 or 2015 — simply renewed their existing loans during that low-rate window. These borrowers typically carry smaller outstanding balances and have benefited from years of price appreciation and principal paydown. Despite facing higher rates at renewal, they are generally in a stronger financial position and less likely to be at risk of payment shock.
Many Borrowers Chose Short-Term Fixed Products in 2022 and 2023
As interest rates began rising, many homeowners with expiring mortgages in 2022 and 2023 opted for short-term fixed products, particularly 3-year terms. At the time:
Variable rates were already high due to policy rate increases.
Fixed rates for 3- and 5-year terms were similar, but many borrowers hesitated to lock in long-term.
Recency bias led many to believe rate cuts would arrive quickly.
This added another cohort of renewals to the 2025–26 window.
Investor and End-User Behavior During the Boom
Many buyers during the 2020–21 period were:
First-time buyers chasing affordability in suburbs and smaller cities
Middle-income asset owners upgrading homes using built-up equity
Investors targeting condos, multi-unit homes, or rentals in lower-cost markets
RE/MAX data shows suburban areas like Durham and Hamilton outpaced Toronto in percentage price growth. Condo inventory also swelled, driven by smaller, investor-friendly units.
Will This Trigger a Financial Crisis Like 2008?
Some have compared the upcoming renewal wave to the U.S. financial crisis of 2008. That comparison misses key structural differences.
Why This Is Not the Same as 2008
Canadian banks hold mortgages on their books rather than offloading them into complex mortgage-backed securities.
Lending in Canada involves stricter qualification standards and federally regulated mortgage insurance.
Mortgage interest is not tax deductible in Canada, discouraging over-leveraging.
Power of sale, not foreclosure, is the legal standard in most provinces. Lenders must obtain market value and return surplus funds to the borrower.
Lenders Do Not Want to Take Over Homes
Banks are not eager to repossess properties. They prefer renewals, payment plans, and amortization extensions. Default is a costly, last-resort outcome.
OSFI and the Government Are Actively Managing Risk
Canada’s federal banking regulator OSFI has shown flexibility, including approving extended amortizations and permitting blanket appraisals on pre-construction condos. The likelihood of policymakers allowing systemic banking stress is extremely low. The banking system in Canada also has immense pollical influence so it would be likely that the Government would be willing and able to step in to help if needed.
Who Is Actually Vulnerable in the Renewal Cycle?
The impact of renewal will be uneven. Some borrowers are more exposed than others.
End Users
First-time buyers who entered at peak prices with minimal down payments
Rate-enabled borrowers who could only qualify under ultra-low rates
Households without income growth or asset buffers
Investors
Owners of negative cash-flow rental properties
Condo investors relying on appreciation rather than rental income
Buyers in suburban markets where prices have softened
Key Risk Factors
Small down payments
Static-payment variable mortgages
Negative amortization
Amortizations already stretched to 30+ years
What Smart Homeowners Are Doing Now
Many borrowers are already taking steps to soften the impact of their upcoming renewal.
Some are locking in early through pre-approvals or refinancing ahead of time. Others are using blend-and-extend strategies to smooth payment increases. For those with available capital, lump-sum payments at renewal reduce principal and future interest. Extending amortization is also common, and many are using mortgage brokers to shop the best options rather than relying on default renewal terms.
Summary:
Holding rates early or refinancing ahead of maturity
Blending and extending into a manageable payment
Making lump-sum payments to reduce principal
Using mortgage brokers to compare options
Looking Ahead: What the Market Might Look Like in 2026
While nobody can predict outcomes with certainty, several trends are emerging.
Properties in prime Toronto neighborhoods, especially renovated, well-maintained single-family homes with high utility, will likely outperform. These are the homes serious buyers continue to target — particularly the financially capable end-user households profiled in this analysis of who is still buying. That group remains focused on livability, quality, and long-term fit, not speculation.
On the other hand, condos, suburban properties, and investor-driven assets may underperform. Many of these homes were bought with small down payments, carry high monthly costs, or face increased competition from similar listings.
Renewal pressure is likely to result in slower consumer spending and cautious price growth, but not a crash.
This shift also reflects a deeper structural change in the real estate market — particularly for investors. The old regime of passive, rate-driven appreciation has broken down, and what’s working now is far more strategy- and effort-dependent. For a full breakdown of how the investment landscape has evolved, read: How Real Estate Investing Has Changed in Toronto
Common Questions About the Mortgage Renewal Wave
Will my payments double when I renew?
It depends on when you bought and how much principal has been paid down. Borrowers from 2020–2021 may see big increases. Borrowers with 3-year fixed terms from 2022–23 may see lower rates upon renewal.
What percent of mortgages renew in 2025–26?
About 60% of all outstanding mortgages in Canada.
How can I lower my payments?
Pre-pay the principal at renewal or extend amortization to reduce monthly cost.
Can I extend my amortization?
Yes, but there are limits. Speak to a qualified mortgage professional.
What if I can’t afford my new payment?
Speak to your lender early. Banks do not want defaults. Options may be available to restructure.
Fixed or variable in 2025?
Depends on your risk tolerance. Fixed offers certainty, variable may be cheaper — but no one can predict the path of rates.
Will this cause a crash?
Major banks do not forecast a crash. Some segments will be pressured, but the overall market is expected to stabilize.
Can I renew early?
Yes, but early renewals may have penalties. Start planning at least 6 months out.
How are banks handling this?
Most are reaching out proactively. Regulators have eased some switching restrictions.
Should I shop around at renewal?
Yes. A broker may help you save 5–20 basis points. It’s worth comparing options.
Glossary: Mortgage Terms That Matter
Trigger Rate
When interest equals your monthly payment on a variable mortgage — you stop paying down principal. Source
Negative Amortization
When unpaid interest is added to your loan balance. Source
Blend-and-Extend
Combining current and new rates and extending the term to lower payments. Source
Stress Test
A qualification buffer that tests whether you can afford 2% higher than your contract rate. Source
Power of Sale
The lender sells your property but must obtain fair value and return the surplus. Source
Foreclosure
The lender takes ownership. Rare in Canada. No requirement to maximize sale price. Source
This article was written by Cameron Levitt, a Toronto-based real estate agent known for clear strategy, honest insight, and deep understanding of how today’s market conditions are shaping long-term outcomes for homeowners. To learn more or connect directly, visit www.clre.ca or reach out at cam@clre.ca.
