Posthaste: Homeowners up for renewal are in for a wake-up call

Homeowners across Canada are in for a surprise as many come up for mortgage renewal. In the last few years, people took out five-year mortgages with low interest rates. Now, as these mortgages mature, borrowers are facing much higher rates—and that means monthly payments are rising fast. While the central bank has cut its key rate slightly, long-term bond yields—what most renewals are based on—haven’t dropped much. The result? Renewing at these rates could stretch household budgets significantly.

About 60 to 76 percent of mortgages will renew over the next two years. Many people locked in deals during record-low rates in 2020 to 2022. Now, as bond yields stay elevated, their renewal rate will jump well above what they pay now. That means increases—not just small ones, but noticeable jumps—that could push some households into financial stress.

Canada’s banking watchdog has flagged this as one of the biggest risks to financial stability right now. It warns that the "payment shock" these renewals bring could lead to missed payments or even defaults. With many households already using most of their income just to pay regular bills, an unexpected rise in mortgage payments could force them to cut back elsewhere—or worse, fall behind on their mortgage.

Homeowners with variable-rate mortgages or shorter terms now face the biggest risks. Unlike in the U.S., where most mortgages stay fixed for 30 years, Canadian mortgages reset every five years. So when they reset now, they do so at much higher market rates. Experts warn that moving to longer-term renewals—like locking in for 10 years—might help, but it would need policy changes.

Even though wages and employment remain fairly strong, rising mortgage bills could put a damper on household spending and weigh on the economy. Regulators say they’re closely watching bank practices, ensuring lenders check borrowers’ ability to pay the higher rates. At the same time, institutions are rethinking how they price renewals and manage risk.

For homeowners, the message is clear: don’t take your renewal for granted. When your mortgage term ends, shop around. Check both variable and fixed offers, and consider extending to longer terms if offered. Talk to your lender about what you can afford at higher rates, and budget for possible hikes. Taking action now can help avoid shocks later—and turn a renewal into a smart financial move.