A growing number of Canadian households are feeling the pinch from mortgage renewals, but the overall pressure on the system may not be as dire as headlines suggest, according to a new report from TD Economics.
Economist Maria Solovieva says that while many borrowers are absorbing higher monthly payments, the national picture shows mortgage payments trending downward thanks to early relief for some borrowers and a shift in rate dynamics.
Why mortgage payments are falling despite rising renewals
“It may come as a surprise to learn that aggregate mortgage payments in Canada are actually declining,” Solovieva wrote in the research note published on Wednesday. “Let’s unpack how both dynamics can be true at the same time.”
About 60% of outstanding mortgages are set to renew by the end of 2026, and 40% will likely do so at higher rates, she noted. For example, someone with a $500,000 mortgage who locked in at 2.5% in June 2020 would now be renewing closer to 4.0%, raising their monthly payments by roughly $320.
However, Solovieva explains that national mortgage payments are based on total dollar volume, not number of households. This means that large-balance borrowers have an outsized effect. Many of those with larger mortgages took out variable-rate or short-term fixed loans during the peak rate environment in 2023 and are now seeing meaningful relief, Solovieva says.
“In the final two quarters of last year, mortgage interest payments declined by an average of 1.7%, providing enough relief to push total mortgage payments into contraction,” the report said.
TD estimates more than one-third of upcoming renewals fall into this “early relief” group, with payments dropping significantly for those rolling over one-year terms or variable-rate mortgages as the Bank of Canada began easing in mid-2024.
Who’s still at risk
However, not all borrowers are better off come renewal. Solovieva notes that 40% of renewals will come from the cohort who locked in ultra-low rates in 2020 and 2021. These borrowers are more likely to face payment increases, particularly during the peak renewal period in late 2025 and early 2026.
Still, the report says panic isn’t warranted given that Canadian homeowners are entering this cycle with more equity and savings.
Since early 2020, the national home price index has jumped 25%, household financial assets are up 45%, and liquid deposits have climbed 42%. Disposable income for mortgage borrowers has also risen 27%.
“These facts suggest that many homeowners have some flexibility to temper the increase in their monthly payment—whether it’s through extending the amortization, refinancing, or pre-paying,” Solovieva wrote.
But risks remain, especially for lower-income borrowers and those in high-cost regions. TD expects unemployment to peak at 7.3% in Q4 2025, just as many from the low-rate cohort face renewals.
“Over the past five years, [lower-income borrowers’] debt growth has outpaced income gains, creating more vulnerability to rising payments, job loss, or both,” the report said.
Ontario and British Columbia, where average mortgage balances are higher, are already showing faster increases in delinquency rates.
The picture is more troubling still for non-mortgage borrowers. While these debts make up just 25% of household liabilities, they account for 45% of debt-servicing costs. Many of these products carry shorter terms and higher rates, which is pushing up defaults.
“This persistent pressure on debt servicing creates a key constraint on consumer spending growth,” Solovieva warned. “All in all, it will be harder for the consumer to develop a spring in their step.”
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Last modified: July 9, 2025