The Canadian banking industry is entering what may be the most important mortgage renewal cycle in decades.
Nearly half of Canadian homeowners will renew their mortgages by the end of 2026, trading some of the lowest interest rates during the pandemic for significantly higher payments.
This concern is not limited to homeowners. Investors, policymakers and lenders are paying close attention to how borrowers will respond to this shift. So far, Canada’s major banks have struck a cautious tone.
The topic was a focus at last month’s Barclays Global Financial Services Conference in New York, where the bank’s top leaders acknowledged the scale of the coming renewals but expressed optimism about the ability of most households, and the financial system as a whole, to cope with the adjustment.
Waves of updates coming, but no panic
According to the Bank of Canada, at the peak of the renewal cycle, the average monthly mortgage payment could increase by about $400. For many families, this means a significant increase in the cost of living, especially in areas already feeling the financial pinch.
Banks are forecasting similar growth, with TD expecting average payment increases for renewing customers in 2026 to be just over 3% of household income.
While early signs suggest households are coping, with the first wave of renewals well underway in 2025, there are signs of financial strain.
CIBC reported that mortgage delinquencies rose to 36 basis points in the third quarter, while BMO said its provisions for impaired loans remained high at 45 basis points.
RBC noted rising pressure in Windsor, where a slowdown in the auto industry has strained household budgets. Meanwhile, Scotiabank notes that variable-rate mortgage delinquencies appear to be leveling off, but fixed-rate delinquencies are currently trending upward.
Borrower resilience and lower interest rates ease lender concerns
At the Barclays conference, executives stressed that while some borrowers will face increased repayments, the situation is manageable, especially as interest rates continue to fall.
TD Bank chief risk officer Ajai Bambawale told investors that about 64% of the bank’s mortgage customers are expected to see lower payments when they renew in 2026. For those facing higher costs, the impact should remain “within the B-20 pressure range” [test],” he said.
For borrowers who do see an increase, “it’s manageable,” he added, noting that it equates to about 3.5% of household income. “So, overall, I think the book is very powerful,” he said.
Phil Thomas, chief risk officer at Scotiabank, shares a similar view. He said average monthly mortgage payments have increased by about $200 since launch, but that number is expected to decline as more borrowers renew their loans at lower rates. “Next year, that number will drop to about $130.”
Home equity and solid credit profile provide safety net
In addition to interest rates, lenders point to two key financial cushions: homeowner equity and credit quality.
Many Canadians, especially those without mortgage insurance, have built up strong stock positions over the years. CIBC Chief Financial Officer Rob Sedran said the bank’s uninsured mortgage portfolio has an average loan-to-value ratio of just over 50%, while impaired loans are closer to 60%. “So there’s a lot of room to absorb some of the impairment without worrying too much about losses,” he said. “Our net charge-off rate is less than 1 basis point.”
Meanwhile, RBC is banking on the strength of its borrower profile. Its mortgage book has an average credit score of nearly 800, a number that reflects strong repayment capabilities. While the bank acknowledged continued pressure in areas such as Windsor where it was seeing “increased stress,” executives believed the broader mortgage portfolio remained solid.
“Overall, everything remains in line with our expectations for the book,” Chief Financial Officer Katherine Gibson said.
Banks slow down mortgage loan growth, prioritize stability
As they complete the mortgage renewal cycle, banks are also rethinking how they handle lending, moving away from chasing market share and focusing more on maintaining healthy profit margins and strong credit standards.
National Bank used its time at the Barclays conference to highlight its growing U.S. presence through its specialty finance arm, Credigy. The bank focuses on providing structured residential mortgage credit to high credit score, low loan-to-value borrowers.
The strategy emphasizes credit performance and selectivity rather than volume growth, an approach the bank believes will hold up well even in a more challenging macroeconomic environment, according to investor materials and recent commentary.
Canadians still grappling with high housing costs
Despite the banks’ more cautious approach, housing affordability remains a major concern for many Canadians. RBC’s latest affordability index shows that while the cost of ownership in the Prairies has returned to more typical levels, cities like Toronto, Vancouver and Victoria remain among the least affordable in the country.
Nationally, the share of median household income needed to cover housing costs has fallen, to 53.6% from 63.5% in late 2023, but remains well above pre-pandemic levels, with slower wage growth also limiting the benefits of lower interest rates.
The next few years will be more of a steady correction than a quick relief, said Scotiabank’s Phil Thomas, who noted that while affordability remains tight, some early signs of improvement are starting to emerge.
Highlights of each bank
TD
- Sixty-four percent of 2026 renewals will see reduced fees; most others still pass the B-20 stress test.
- The average increase is only 3.5% of a borrower’s income.
- Apartment exposure amounted to $62 billion (about 15% of book value), showing delinquency rates consistent with the broader portfolio.
- Developer loans totaled just $2.5 billion, and pre-sales were strong and diversified.
Scotiabank
- Mortgage delinquency rates were generally stable; variable rate books improved while fixed rate books increased slightly.
- Since launch, the average monthly mortgage payment has increased by about $200 and is expected to fall back to about $130 by 2026.
- Younger borrowers (15-24 years old) showed greater stress due to higher unemployment rates, but accounted for only 1-2% of the portfolio.
- The market is pricing in future interest rate cuts as support for repayment capabilities.
Canadian Imperial Bank of Commerce
- Mortgages account for about 10% of personal and commercial bank income, or about 4% of business income.
- Delinquencies were 36 basis points; net charge-offs were less than 1 basis point.
- The average uninsured LTV is just over 50%; impaired mortgages are closer to 60%.
- The bank emphasizes margin rather than volume; net interest margin is supported by balance sheet hedging, product mix and the Costco credit card partnership.
bank of montreal
- Rate cuts are expected to ease renewal pressure; the macro backdrop is seen as more supportive than at the beginning of the year.
- PCL was impaired, falling from 66 basis points in late 2024 to 45 basis points in Q3; ACL coverage was approximately 70 bps.
- Performance reserves have slowed to about $25 million after building up nearly $900 million over the past year.
- Net interest margin increased 16-17 basis points year over year and increased by another 2 basis points in the third quarter; this was helped by reducing term deposits and repricing higher-cost financing.
- Notably, unsecured Canadian consumer loans are likely to come under further pressure, although they remain a small portfolio.
national bank
- U.S. subsidiary Credigy expanded its structured mortgage credit portfolio with strong momentum from the second quarter to the third quarter.
- The focus remains on high FICO, low LTV US residential borrowers; no CRE or multifamily exposure.
- The growth target is 5-10% per year, with higher growth during periods of market disruption.
- The entire model operates B2B, initiating asset purchases through partners rather than direct consumers.
red blood cells
- The average FICO score across the entire mortgage book is nearly 800, underscoring credit quality.
- Ontario — and Windsor in particular, due to a weak auto industry — was flagged as a pressure point.
- The HSBC integration is expected to generate $300 million in revenue synergies, particularly in mortgage lending and cross-selling.
- By 2027, AI investments are expected to generate between $700 million and $1 billion in enterprise value.
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Last modified: October 31, 2025
