For three years, economists warned of the “Mortgage Renewal Cliff”—the moment when millions of Canadians who locked in 1.5% interest rates in 2020/2021 would slam into 4.5%+ rates.
That moment is now.
According to the Bank of Canada, 60% of all outstanding mortgages are renewing between 2025 and 2026. But instead of a mass wave of defaults, the market is surprisingly stable. Why? Because the federal government quietly changed the rules of the game.
Here is the technical breakdown of the “Payment Shock,” the new OSFI rules saving homeowners, and why your monthly bill might be the only thing that goes up this year.
The Math: The “Payment Shock” is Real (But Uneven)
The “Cliff” isn’t hitting everyone equally. In fact, for some, it’s a slope.
The Losers (5-Year Fixed): If you locked in a 5-year fixed rate in 2021 (at ~2%), you are the hardest hit. Bank of Canada data projects an average 15% to 20% increase in monthly payments for this group in 2026.
The Winners (Variable Rate): Surprisingly, variable-rate holders are catching a break. Thanks to the Bank of Canada cutting the overnight rate to 2.75% and holding it there, roughly 25% of variable-rate borrowers will actually see their payments decrease upon renewal in 2026 compared to their peak 2024 highs.
The “Parachutes”: 3 Major Policy Fixes
To prevent a housing crash, Ottawa deployed three critical regulatory changes in late 2024/2025 that are fully active now.
1. The “Forever” Amortization (30 Years)
As of December 15, 2024, the government expanded 30-year amortizations to include all first-time homebuyers and all buyers of new builds (previously, it was restricted).
The Impact: By stretching your loan from 25 to 30 years, you can lower your monthly payment by hundreds of dollars—offsetting the interest rate hike.
2. The “Switch” Fix (No Stress Test)
In the past, moving your mortgage to a cheaper lender required you to pass the “Stress Test” (qualifying at ~7%). This trapped people with expensive banks.
The 2026 Rule: You can now switch lenders at renewal without re-qualifying for the stress test (for straight renewals). This has unleashed a price war among lenders fighting to keep your business.
3. The $1.5 Million Cap
The cap for “Insured Mortgages” (which allow less than 20% down) was raised from $1 million to $1.5 million. This allows buyers in Toronto and Vancouver to enter the market with lower down payments, keeping demand alive despite high rates.
The Scorecard: 2021 vs. 2026 Renewal Rules
If you are walking into a bank branch this week, the rulebook is completely different from when you signed your mortgage.
| Rule | The Old Way (2021) | The New Way (2026) |
|---|---|---|
| Switching Lenders | Stress Test Required. (Trapped borrowers) | No Stress Test. (Free to shop rates) |
| Max Amortization | 25 Years (for most) | 30 Years (for First-Time/New Builds) |
| Insured Price Cap | $1 Million | $1.5 Million |
| Forecasted Price | Booming (+20%) | Flat / Dipping (-0.7% RBC Forecast) |
People Also Ask
Will mortgage rates drop in 2026?
Likely not much further. The Bank of Canada has held the overnight rate steady at 2.75%, and RBC Economics predicts it will stay there through 2026. The era of near-zero rates is over; 3.5% – 4.5% is the new normal.
Can I extend my mortgage to 30 years?
Yes, if you qualify. New rules effective late 2024 allow all first-time homebuyers and all buyers of newly constructed homes to access 30-year amortizations. If you are renewing an existing mortgage, you may also be able to extend back to your original amortization to lower payments.
Do I have to pass the stress test to switch lenders in 2026?
No. Under the updated mortgage rules, borrowers with insured mortgages (and straight uninsured switches) generally do not need to pass the stress test again when switching lenders at renewal, provided the loan amount and amortization period remain the same.
What happens if I can’t afford my mortgage renewal?
Contact your lender immediately. The “Mortgage Charter” requires banks to offer relief options, such as temporary amortization extensions, interest-only payments, or adding missed payments to the mortgage balance, before considering foreclosure.
Worried about the cost of living? See if you qualify for the Bill S-206 UBI Benefits. Or, read about the economic boom coming from the Indigenous Loan Guarantee.