Payment Shock 2026: Why Many Renewals May Jump 20%

What’s driving the sharp renewal increase forecast for 2026 and how homeowners can prepare.

A large wave of Canadian mortgages comes due through 2026. Bank of Canada staff estimate roughly 60% of outstanding mortgages will renew in 2025 and 2026. Five-year fixed borrowers who locked in during 2020 or 2021 face some of the biggest adjustments, with typical payment increases in the 15% to 20% range at renewal, depending on rate path and remaining amortization.

Why 2026 Bites

1. The renewal bulge: Pandemic-era originations are maturing together. Both the Bank of Canada and OSFI have flagged the concentration of renewals by the end of 2026 as a systemic risk that could stress borrower budgets and lender portfolios.

2. Rate reset math: Even if rates drift lower from their 2023 and 2024 peaks, many 2020 and 2021 mortgages will still renew at 1.5 to 2 percentage points higher than their original rate. According to Bank of Canada modeling, this equates to mid-teens to near-20% payment lifts for a large share of five-year fixed renewals.

3. Amortization catch-up: Variable-rate borrowers who kept payments static during 2022 to 2024 effectively extended their amortization. When those loans reset, amortization “catch-up” adds pressure even if headline rates fall.

4. Tighter oversight: Regulators are instructing lenders to monitor higher-risk renewals closely. The Financial Consumer Agency of Canada (FCAC) released updated guidance in 2025 requiring lenders to proactively contact borrowers facing hardship and offer payment relief options.

How to Estimate Your Own Jump

Confirm your maturity date and balance. You can find this on your renewal letter or lender portal.
Run a renewal quote with today’s rates plus a 0.5 to 1.0% buffer. That is a realistic “stress-tested” range.
Review your amortization schedule. If your amortization grew due to variable-rate underpayment, expect your new payment to rise even more as it resets.
Model your total housing costs. Include taxes, insurance, utilities, and maintenance, not just the mortgage payment.

Tactics to Blunt the Shock

1. Lock early. Most lenders offer 120-day rate holds. Securing one can protect you from pre-renewal spikes.

2. Adjust the amortization. Extending from 25 to 30 years can soften the monthly impact. Just ensure you have a plan to shorten it later.

3. Make pre-renewal payments. Even small lump sums reduce the balance that your renewal payment is calculated on.

4. Shop the market. Many lenders will offer no-fee switches to attract strong borrowers. Compare both fixed and variable offers.

5. Blend strategically. If rates drop before maturity, a blend and extend may offer stability without penalties.

6. Fix what you can predict. If volatility stresses you, choose a fixed term that balances rate and flexibility.

7. Build a cash buffer. Aim for three to six months of housing costs in savings or available credit.

8. Eliminate high-interest debt. Pay off credit cards or loans before renewal. It improves ratios and rate eligibility.

9. Know your hardship options. Lenders can temporarily adjust terms for borrowers in good standing. FCAC’s 2025 guideline ensures fair treatment and transparency.

What If Rates Drift Lower Before You Renew

If the Bank of Canada begins rate cuts before your renewal window, it may ease some pressure, but do not count on a full rollback to pandemic-era levels. Remember, payment savings only lock in when you actually renew, not when you see headlines.

Hold your rate, monitor the bond market, and re-price before closing if yields move in your favor.

A Quick Case Study

Original mortgage: $500,000, five-year fixed from late 2021 (25-year amortization) Renewal in 2026: Approximately $425,000 balance

Scenario A: Renew at a rate 1.75% higher than the original. Payment jump of about 18%.
Scenario B: Extend to 30 years, prepay $10,000 before renewal, then add $150 monthly once renewed. This trims the payment shock to under 10% and preserves long-term flexibility.

Broker Checklist Before You Sign

Get written quotes from multiple lenders.
Compare effective rates after cash-back or switching costs.
Review penalty and portability clauses.
Confirm prepayment flexibility and amortization options.
Have updated income documentation ready for any refinance.

Bottom Line

Payment shock is coming, but it does not have to be devastating. With early preparation, accurate modeling, and a few tactical adjustments, most homeowners can absorb the 2026 renewal wave without major financial disruption.

The key is acting early, not waiting for renewal notices to arrive in the mail. A proactive broker or financial advisor can model your options now and save you thousands later.

Sources and Further Reading

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