Roughly 60 per cent of Canadian mortgage holders will face higher monthly payments when their loans come up for renewal in 2025 and 2026, according to a new Bank of Canada report.
In the latest staff analytical note, the bank says that although mortgage interest rates are expected to gradually decline, most borrowers will still see payment increases relative to their current contracts — many of which were signed during periods of lower interest rates.
The report estimates that in 2025, homeowners renewing their mortgages will see an average increase of 10 per cent in their monthly payments compared to December 2024 levels.
In 2026, the increase is expected to moderate to around six per cent.
The payment increases will vary depending on mortgage type. According to the bank, borrowers with fixed-rate mortgages, especially those with five-year terms, are likely to experience the steepest jumps in payments ranging between 15 and 20 per cent on average.
These borrowers make up 40 per cent of all mortgages in Canada and are driving the overall upward pressure on renewal payments.
While the majority of borrowers will see their payments rise, the bank’s analysis shows that not all will be affected equally.
For homeowners with variable-rate mortgages that adjust monthly, payments are projected to decrease by five to seven per cent. Meanwhile, those with variable-rate mortgages with fixed payments may see mixed outcomes: around 10 per cent of these borrowers are expected to face increases of more than 40 per cent in 2026, while 25 per cent may see decreases of at least seven per cent.
According to Ratehub.ca, a homeowner who bought an average-priced home in 2020 with a low fixed mortgage rate could see their monthly payments rise by about $424 when they renew this summer. That adds up to nearly $5,100 more per year, or a 19 per cent increase in costs, even though the mortgage balance has decreased over time.
For variable-rate borrowers, the outlook may be a bit better. Ratehub.ca estimates that someone renewing this summer could see their mortgage payments drop by about $69 per month or nearly $830 per year — thanks to recent cuts from the Bank of Canada.
Strain on households budgets
Borrowers facing payment increases at renewal are expected to see a sharper rise in their mortgage debt service (MDS) ratio — the share of income spent on mortgage payments — compared to those with payment decreases, the Bank of Canada says.
For those with rising payments, the median MDS ratio is projected to climb from 15.3 per cent in December 2024 to 18 per cent by the end of 2026. By contrast, borrowers with decreasing payments will see their median MDS ratio fall from 19.7 per cent to 18.6 per cent.
These projections assume no change in income though the bank notes many borrowers likely experienced income growth since their last mortgage term — helping them better manage higher payments.
New buyers rely on financial help
A large number of Canadians are leaning on financial support to access homeownership, according to Mortgage Professionals Canada’s 2025 State of the Housing Market survey. About 2,000 Canadians were surveyed.
The survey, conducted by Bond Brand Loyalty, reveals that 70 per cent of buyers in the past two years could not have purchased their home without help. Across all buyers who received support, 58 per cent said the same.
The report also highlights increasing anxiety around upcoming mortgage renewals. With 74 per cent of mortgage holders set to renew in the next three years, one in five say they are worried about how those renewals will impact their finances.
In a volatile borrowing landscape, Canadians are showing a clear preference for stability with 68 per cent of those surveyed said they chose fixed-rate mortgages.
Despite that, younger and variable-rate borrowers are more likely to make additional or more frequent payments.
Methodology
The Bank of Canada based its analysis on the assumption that borrowers maintain the same type of mortgage and amortization period at renewal.
The amortization period is the process of gradually paying off a debt over a set period of time through regular payments.
The bank also used market-implied expectations for interest rates as of June 17 to model future payment scenarios.
Despite the anticipated financial pressure, the bank noted that some borrowers may not experience changes if they proactively renegotiate terms or adjust their amortization schedules.
