Canada's top banking regulator is cautioning that the next two years will bring significant challenges as millions of homeowners face higher payments when their low-rate mortgages come up for renewal, reports Blacklock’s Reporter.Peter Routledge, superintendent of Financial Institutions, delivered the warning during a C.D. Howe Institute meeting, citing federal data that shows most mortgage borrowers are already facing financial difficulties."We are monitoring mortgage loan trends around variable rate mortgages with fixed payments that could face material payment increases at renewal," said Routledge. "Most Canadians are keeping up with their mortgages. 2025 and 2026 will be challenging years."The scale of the looming renewals is substantial. "As of January, 56% or 3.3 million mortgages are set to renew by the end of 2026," said Routledge. "Of these approximately 61% or two million have yet to experience increased payments. We are likely to weather some headwinds in the housing market over the next few years if the economy slows as a result of trade tensions.".When asked by a moderator to "comment on what you see as the current risks in the housing market," Routledge acknowledged the brewing storm while maintaining that the situation remains manageable.The superintendent has previously expressed alarm about the potential shock awaiting mortgage holders. In testimony last June 11 at the Commons finance committee, he warned about interest rate impacts on renewals."Mortgagors who in particular during the pandemic took out variable rate mortgages that had fixed payments, those folks could face mortgage payment increases of around 50%," testified Routledge. "It varies by mortgage and timing but 50% is sort of a good ballpark. That is a very significant shock to monthly finances and one we are very concerned about."When NDP MP Don Davies (Vancouver Kingsway, BC) asked, "Are we facing a mortgage renewal cliff?" Routledge pushed back on the dramatic characterization."I wouldn't use that analogy," replied Routledge. "It is not dramatic, it is incremental.".He identified "about 175,000 households" with variable rate mortgages at fixed payments that barely meet rising interest costs."What impact if any do you expect an increase in residential mortgage loans falling into arrears or default will have on housing prices in Canada?" asked MP Davies."It's hard to predict the future," replied Routledge.The regulatory warning comes as borrowers are already showing signs of stress. A May 21 CMHC Mortgage Consumer Survey found that most mortgage borrowers, 51%, "had difficulty maintaining debt payments." Twenty-two percent borrowed new money to pay old debts, typically credit card proceeds. "Fourteen percent missed a mortgage payment," said the report.
