Mortgage Outlook 2026: The Renewal Wave & Payment Shock

One of the most important dynamics in Canada heading into 2026 is the renewal of existing mortgages. Many homeowners locked in relatively low fixed rates in prior years will see those terms expire and be forced to renegotiate. The Bank of Canada’s own research suggests that, on average, those renewing fixed-rate mortgages could see a 20% increase in payments. Because of this “payment shock,” mortgage renewals are flagged as a systemic risk. The Office of the Superintendent of Financial Institutions (OSFI) paints a picture of considerable stress for households under higher borrowing costs.

The Canadian housing market is expected to lean toward stabilization, with only modest growth overall and meaningful variation by region and property type.

Interest Rate Expectations & Trends
The path of interest rates will strongly influence how painful renewals are and how new borrowing conditions evolve. Some key expectations:

Many forecasts project the Bank of Canada lowering its policy rate to 2.25%, perhaps staying at that level for much of the year.
This could lead mortgage rates to soften slightly, although they may remain well above the lows from earlier in the decade.
For variable-rate mortgages, payments may ease further given declining interest rates. For fixed-rates renewing, the key is locking in before rates creep higher again or staying ahead of market movements.

So, while 2026 may bring some relief, it’s unlikely to be dramatic. Many households will still feel pressure, especially those on tight budgets or with less flexibility.

Risks, Challenges & Upside
Key Risks

Household Affordability & Leverage: The degree of payment shock faced by many households could suppress demand, particularly among middle-income and first-time buyers.
Tighter Lending Standards: Lenders may raise credit barriers, bump required down payments, or emphasize stress tests more heavily.
Economic Sluggishness: Some economists (e.g. Oxford Economics) forecast Canada remaining weak through 2026, which would dampen housing demand.
Regional Oversupply: Certain markets (especially Ontario, B.C.) may continue to be weighed down by excess listings and weaker demand.

Potential Upsides

Rate Relief: If the Bank of Canada can cut rates further or stabilize rates at lower levels, that may help cushion some of the stress on renewals and new mortgages.
Rental / Investment Demand in Tight Markets: Regions where supply is constrained may still attract investors or those shifting to rentals, bolstering values.

What Stakeholders Should Do

Homeowners / Renewing Borrowers: Start reviewing options early. Understand your buffer for higher payments. Consider locking fixed rates ahead of renewal if possible.
Prospective Buyers: Be cautious and don’t assume big price gains. Focus on properties with strong fundamentals, and buy within qualification or less.

2026 in Canada’s mortgage and real estate space is unlikely to be a boom year, but likely one of transition, stress, and selective resilience. The biggest challenges will come from renewing mortgages at higher rates and managing affordability in markets already stretched. The upside is that well- positioned homes, careful planning, and strong valuation/backing will help those who prepare.

Candace Perko, Mortgage Broker