Mortgage Renewal: Impact on Your Monthly Payments

Are you approaching your mortgage renewal? You’re not alone. In 2025 and 2026, about 60% of households will have to renew their mortgage. But what impact will this renewal have on your monthly payments? The Bank of Canada has released a detailed analysis to help Canadians prepare for their upcoming mortgage term renewal.

Current Situation

Over the past few years, mortgage rates have seen significant fluctuations. After a period of steep increases, rates started to slowly decline since June 2024. This shift directly affects the new monthly  amount payable by borrowers whose mortgages are up for renewal, especially those who borrowed during the COVID period when rates were historically low.

To help Canadian families prepare for these changes, the Bank of Canada analyzed thousands of loans. They found that many households will see an increase in their payments, but the rise will generally be more moderate than expected. However, even a small change in rates can increase your monthly payments, especially if you are renewing at a higher interest rate than before.

Key Statistics 

By 2026, around 6 out of 10 households will have to renew their mortgage. The Bank of Canada expects average monthly payment to rise by 10% in 2025 and 6% in 2026. Here’s what these numbers mean for each mortgage type:

5-Year Fixed Rate Mortgage

• Represents about 40% of mortgages in Canada
• Expected increase of 15% to 20% in monthly payments

Variable Rate Mortgage With Variable Payments

• Represents nearly 30% of mortgages in Canada
• Expected decrease of 5% to 7% in monthly payments

Variable Rate Mortgage With Fixed Payments

• Impact varies depending on repaid principal
• Around 10% of borrowers may face a 40% increase
• About 25% could benefit from a decrease of at least 7%

Shorter terms (2 to 3 years) are also becoming more popular, now making up 74% of new low-ratio mortgages (with larger down payments). This shows that many borrowers prefer to stay flexible not knowing where the economy will be in the coming years.

Why Do the Numbers Vary?

The impact of your mortgage renewal on monthly payments depends on your loan type, the timing of renewal, and how much mortgage balance you’ve already repaid.

The ability of some households to absorb or mitigate the impact of an increase closely links to the amount of principal they repay. Some households have successfully adapted to interest rate changes in recent years. Households that have paid down more principal are better able to absorb or reduce the effect of rate increases. 

Others have extended their remaining amortization period (repayment period), lowering their monthly payments. Borrowers who made a lump sum payment are also less likely to face higher costs.

How to Better Manage Your Renewal

While mortgage renewal can feel stressful, there are several ways to manage it and keep control of your budget:

Extend your amortization period. Stretching payments over a longer term can reduce monthly payments and make the transition more comfortable. However, it may increase the total loan cost given that interests will be paid on a longer period of time.

Compare mortgage offers from different lenders. Take the time to compare offers from several financial institutions before making your choice. The rates offered can vary depending on the lender. Even small rate differences can have a big impact on your payment amount. This can help you decide whether a fixed or variable option is best.

Negotiate the terms of your mortgage contract. Some banks offer more flexibility than you might think. Whether it’s adjusting payment frequency or modifying loan terms, there are options to reduce your monthly payments.

Work with a mortgage advisor. A professional can assess your situation, model different scenarios, and recommend the best strategy to help you eventually pay off your mortgage faster or  with  payments that fit your budget.

Plan ahead. Avoid delaying renewal talks with your lender just before your loan maturity date. Taking action early gives you more options to minimize the impact on your payments. Mortgage renewal can bring either an increase or decrease in monthly payments, but with planning and the right strategies, you can minimize the impact of higher monthly costs. By preparing ahead of time, you’ll make this transition much easier.

If rising mortgage payments are putting you in a difficult financial position, M. Roy & Associés can help. Whether through financial restructuring or a consumer proposal, our advisors provide tailored solutions to help you regain control of your finances.