Thousands of five-year, fixed-rate mortgages were renewed in December in Canada with thousands more coming due in 2026. Renewals do not come with good news for mortgage holders.
Penelope Graham of Ratehub.ca says fixed rate holders are in line for higher payments.
“In the latter half of 2023 and early 2024, mortgage market watchers, including the Bank of Canada, sounded the alarm on the viability of mortgage renewals in 2025 and 2026,” says Graham.
“With rates sharply higher than they were in 2020 and 2021, when many of today’s renewing five-year terms were taken out, there was concern that a great number of borrowers would face payment shock when renewing, leading to a wave of mortgage defaults.”
“Fortunately, this hasn’t materialized as feared. Lower mortgage rates, compared to late 2023, have taken the edge off for borrowers. While still renewing into higher payments, they're more manageable, especially when combined with the fact that renewing borrowers have paid off more of their mortgages and have built up greater equity.”
According to Ratehub.ca's mortgage payment calculator, a homeowner who put a 10% downpayment on a $607,280 home (average home price in Canada as of December 2020, per CREA) with a five-year fixed rate of 1.39% (the best rate available in December 2020) amortized over 25 years, for a total mortgage amount of $563,495, would have had a monthly mortgage payment of $2,224.
“When renewing in December 2025, they would have a mortgage balance of $465,843, a five-year fixed rate of 3.94% (the best renewal rate then available) and a new monthly mortgage payment of $2,800,” says Graham, adding the homeowner will pay $576 more per month on their mortgage payments.
It’s slightly better news for variable-rate borrowers
“2026 ushers in a long-awaited era of stability for variable mortgage rates; barring any economic surprises, the Bank of Canada has taken a rate-hold stance and has signalled it will remain for the foreseeable future,” says Graham.
“In both its October and December rate announcements, the bank’s Governing Council emphasized they feel the current policy rate is ‘about right’ to support economic conditions, which continue to adapt to the evolving trade landscape.”
Strong GDP and labour market numbers showed little need for the bank to add additional stimulus at the time, adds Graham.
“And it won’t need to in 2026, should the economy perform as the bank has forecasted,” she says. “Overall, the bank expects inflation, a key pillar of its decision making, to remain close to its 2% target, before trending upward at year’s end as the economy strengthens, which may open the door to a rate increase in early 2027.”
The difference between fixed and variable may sway borrowers to the latter.
“While fixed mortgage rates always account for the lion’s share of the market, borrowers increasingly turn to variable options when the price is right, a dynamic that will play out in 2026,” says Graham.
“For the first time in three years, variable-rate mortgages are below that of fixed; the lowest five-year variable option in Canada is 3.45%*, compared to the current fixed low of 3.94%. That's a 49-basis-point difference, and that spread may widen further, especially as there are a number of market factors that could keep bond yields, and fixed mortgage rates, elevated throughout the new year.”
“In 2025, borrower interest in variable rates rose as the bank delivered additional rate cuts over the autumn months. On a year-over-year basis, the number of inquiries for variable-rate mortgages on Ratehub.ca increased by 25.7% accounting for 11.5% of all inquiries, compared to just 7% in 2024.”
Renewing variable rate holders will also pay more.
“In December of 2020, a homeowner who put a 10% downpayment on a $607,280 home with a five-year variable rate of 0.99% (the best rate they could receive at the time) amortized over 25 years (total mortgage amount of: $563,495) would start with a monthly mortgage payment of $2,121.”
“By December 2025, at the end of the five-year mortgage term, the homeowner’s effective variable mortgage rate would have increased to 2.99% and their monthly payment would have increased to $2,690.”
“When renewing in December 2025, they would have a mortgage balance of $485,535, a five-year variable rate of 3.45% (today’s best five-year variable renewal rate) and a new monthly mortgage payment of $2,797, or $107 more per month and $1,284 more per year.”
Financial experts caution only people with a high-risk tolerance should choose a variable rate mortgage.
*As of December 2025
