Mortgage holders who are expected to renew their five-year fixed interest rate clauses in 2025 or 2026 will face the biggest increase in payments, according to research by New Bank of Canada.
The group’s average monthly salary payments increased by 15% to 20% compared to its December 2024 level.
The report says these borrowers make up a large part of the Canadian mortgage market, with five-year fixed interest rate clauses accounting for about 40% of all outstanding mortgages.
Most (but not all) will pay for more
Overall, the bank estimates that payments for renewed mortgage holders will rise in 2025 and 2026, even in the recent drop in interest rates.
“The average monthly mortgage payment for people updated in 2025 is likely to increase by 10% compared to their December 2024 payments, while the average mortgage payment for renewers in 2026 may increase by 6%.”
However, this national average masks the main differences depending on the type of mortgage and the borrower’s history.
“The average payment drops by about 5%-7% for those with variable interest rates,” the report noted.
Borrowers with variable interest rates, fixed payment mortgages will see widespread results in renewals, which largely depends on the principal repaid since the Origins or their last renewal.
At the high end, 10% of these borrowers may face more than 40% of payment increases in renewal in 2026, especially those accumulating negative amortization. On the other end, about 25% of people are expected to drop at least 7%.
“Some borrowers have increased monthly payments to ensure that interest and principal continue to be covered,” the report said. “These borrowers will face an increase in payments when renewal, while borrowers’ borrowers face negative amortization borrowers.”
The report found that when banks start or renewals before March 2022, about 80% of the repayment amount exceeds the fees required for their contract when banks start raising interest rates.
On average, they repaid three times the required principal, meaning that the group only had about 5% of the principal balance in early 2025 higher than when they initiated or renewed, which was less than 25% strictly based on contract terms than expected.
One-third of all mortgage holders will feel the impact
The bank estimates that mortgage holders facing higher payments account for about one-third of all mortgage holders in the country. Of these, fixed-rate borrowers are about three-quarters.
Meanwhile, nearly a quarter of mortgage holders will see payments drop, with most holding short-term fixed-rate products in the group.
Management increases
While the looming update shock sounds steep, banks believe many borrowers will be able to absorb the change.
“Most borrowers may earn higher income when renewing and should face lower interest rates than stress-tested,” the report said. It also noted that many have options available, including extending amortization for five years, which could eliminate payment increases for about half of those facing higher payments.
For the borrower yes Under exposure, the mortgage debt service (MDS) ratio is expected to rise from 15.3% in December 2024 to 18% by the end of 2026, still below the 35% benchmark commonly used by lenders in stress tests
The bank concluded that while some people may increase financial pressure, “we do not expect that the upcoming mortgage renewal will cause serious financial stress for affected borrowers to worsen while everything else continues.”
Visited 368 times today, 368 times
Bank of Canada Research BOC fixed mortgage loan interest rate mortgage loan renewal payment increase payment impact renewal
Last modified: July 23, 2025
