60% of Canadians renewing mortgages could see payments go up by 2026

Most Canadian mortgage holders renewing their mortgages in 2025 or 2026 are likely to see an increase in their monthly payments, a recent report by the Bank of Canada says.

Most of these borrowers hold a five-year, fixed-rate mortgage, the central bank said, and could see their monthly payments increase by 15-20 per cent, a BoC staff analytical note said.

However, the increase could be different depending on when you’re renewing.

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“Compared with December 2024 payments, the average monthly mortgage payment could be 10% higher for those renewing in 2025 and 6% higher for those renewing in 2026,” the report read.

However, the picture looks very different for those who are planning on renewing variable-rate mortgages. For them, a renewal might lead to a decline in monthly payments of five to seven per cent.

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This comes amidst cost-of-living increases since the start of the COVID-19 pandemic. According to the Bank of Canada’s inflation calculator, there has been an annual rate of inflation increase of 3.68 per cent since 2020. This means that something that cost $100 in 2020 would cost around $120 in 2025.

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Ratehub.ca estimates that these increased payments could result in Canadian households paying an average of around $5,000 more every year.

“Paying nearly $5,100 more on the mortgage annually is a considerable stretch for many Canadian households,” said Penelope Graham, mortgage expert at Ratehub.ca.

While lenders typically offer lower rates to new customers, instead of returning ones, Graham said those renewing have some options to keep costs down.

“If possible, accelerating payments or making a lump sum payment to lower the overall principal mortgage amount before the term is up is an ideal way to shrink payments at renewal time,” she said.

However, switching from a fixed-rate to a variable-rate mortgage comes with risks, Graham said. The Bank of Canada’s overnight lending rate has dropped 225 basis points since June 2024, bringing variable rates down with it. It is unclear whether the bank will cut rates further.

For Canadians concerned about meeting their mortgage payments if an increase takes place, Graham recommends reaching out to your lender.

“They can help you find a solution, including temporarily deferring your payments,” she said.