By 2026, as a staggering $400 billion in mortgages come up for renewal, homeowners may face monthly payment surges of up to 48%. This is a serious concern, particularly for those tied to negatively amortizing loans, which can extend the loan's duration because only interest is being paid monthly.
What's even more concerning is that the most substantial challenge is expected to hit in 2026, especially for variable-rate mortgages. These homeowners have managed to maintain consistent monthly payments despite rising interest rates. However, if interest rates do not decrease, they could face a sudden and intense payment shock, potentially as high as 84% in 2026. This is a financial wake-up call like no other.
Even in the years leading up to 2026, the situation isn't much better. Shocks of 32% in 2024 and 33% in 2025 have been predicted by experts. This is a gradual but definite rise, increasing the financial burden year by year.
There is a possible lifeline, though. If the Bank of Canada's overnight rate drops by 100 basis points, the payment shock in 2024 and 2025 could be reduced to around 22 or 23 percent. However, to significantly mitigate the impact in 2026, the rate would need to drop to 0.25 percent. Given the current financial landscape and the conflicts unfolding in the Middle East, this is seen as an unlikely scenario.
This predicament isn't just a challenge for homeowners. It's a major hurdle for Canadian banks as it impacts revenue growth, increases the risk of mortgage delinquency, and may lead to greater losses on other credit forms.
As a borrower, you can mitigate some of these risks by working with your lender or renegotiating your mortgage terms altogether.
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By: Sarah Colucci
Senior Mortgage Agent, Lic. M14000929