Dear Valued Subscriber

What’s new (and why it matters)

• The renewal bulge is here. Roughly 60% of Canadian mortgages will renew in 2025–2026, and about 60% of those renewing borrowers will see higher payments, with five-year fixed borrowers from 2020–21 the most exposed. Bank of Canada

• How much more? The Bank of Canada estimates average payments +10% for renewals in 2025 (vs. Dec 2024 levels) and +6% in 2026—with larger jumps for low-rate 2020/21 vintages. Independent coverage pegs typical increases for 5-year fixed renewals at ~15–20% depending on rate and amortization. Bank of Canada+1

• Regulator’s read: OSFI expects delinquencies to keep rising from very low bases as renewals bite—with the GTA and Vancouver showing the greatest signs of stress. OSFI

Bottom line: This isn’t a “systemic shock,” but it is a household-level squeeze—and where you live matters.

Toronto vs. Smaller Markets: Who feels the squeeze?

Why Toronto feels it more

• Bigger mortgages, thinner buffers. Higher purchase prices in the GTA mean larger absolute payment jumps on renewal—even if the percentage increase is similar. OSFI flags the GTA among regions with heightened stress. OSFI

• Condo cohorts from 2020–21. Many first-time buyers took 5-year fixed rates near historic lows; today they’re rolling into rates ~150–200 bps higher than their initial term, even after BoC easing, driving double-digit payment gains. Bank of Canada

• Rent vs. own calculus. With rents still tight but flattening in some cores, the relative appeal of renting can rise temporarily—softening absorption in select condo segments while freehold family homes hold up better.

Why smaller markets are more resilient (on average)

• Lower loan sizes. A 10–15% payment increase on a $500k–$650k mortgage in London, Niagara, Waterloo Region, Barrie/Simcoe translates to a smaller absolute dollar jump than on a $800k–$1M+ GTA mortgage. TD’s worked example: a $500k mortgage moving from 2.5% → ~4.0% is ~+$320/month. TD Economics

• Better rent coverage. Tighter vacancy in many secondary markets keeps rental backstops strong if owners pivot to lease-up, cushioning cash flows for investors relative to carrying vacant listings. (CMHC: debt growth has slowed; fundamentals remain manageable.) Canada Mortgage and Housing Corporation

What the next 100 days likely look like

• Rates: After the September cut, variable payments ease immediately; fixed rates drift lower only as bond yields follow. Expect incremental, not dramatic, declines into Q4. Bank of Canada

• Sales & listings: Renewals plus rate cuts create two-way flows: some owners list to manage higher payments; rate relief coaxes sidelined buyers back. Net effect: more transactions, but measured price response.

• Prices: Our base case—flat to +1–2% nationally into year-end—with Toronto condos lagging freeholds; Prairies/Atlantic/parts of Québec continue to outpace on tighter supply. (Consistent with recent macro reads.) Bank of Canada

What fixed-rate borrowers can do (now)

If you renew by Dec 2025

• Ask for options, not just a rate. Compare shorter fixed terms (1–3 yrs) vs variable if you expect more easing; consider blend-and-extend where offered. Use the BoC’s +10% 2025 average increase as a sanity check against lender quotes. Bank of Canada

• Stretch safely. Extending amortization can smooth payments; do it with a pre-payment plan (lump sums or accelerated payments) to avoid long-run interest drag once rates normalize.

• Stress test your 2026 self. Budget with a further +50–75 bps sensitivity. Even BoC’s 2026 average increase (+6%) can pinch if income is uncertain. Bank of Canada

Toronto-specific

• Condo holders from 2020–21: Price out variable vs. 2- or 3-year fixed; run a sell vs. hold calculation if reserve funds/fees are rising.

• Freeholds: Consider secured lines to buffer renovations/turnover if leasing. Family-sized units near transit/schools remain the liquidity leaders.

Smaller-market owners

• Refi opportunistically. If LTVs improved post-pandemic, shop monoline and credit-union offers; smaller lenders can be competitive, especially on shorter terms.

• Suite potential. Legal secondary units can offset payment jumps and boost valuation multiples on exit.

Investors: underwriting that works in Q4

• Conservative rent grids. Underwrite today’s rents with 0–2% growth, 3–5% vacancy/credit loss, and full-cycle expenses (maintenance, insurance, taxes). BoC’s renewal math implies cap-rate sensitivity; model +50 bps adverse moves. Bank of Canada

• Prefer family-sized product near jobs/transit. Renewal stress hits least where absorption is durable.

• Toronto vs. second-ring markets: For cash-flow targets, look to Durham east (Oshawa/Courtice/Bowmanville), London–St. Thomas, Niagara, Waterloo Region; use GTA selectively for equity-growth plays.

Risk dashboard to watch

• Delinquency trend: Still low, but OSFI expects a gradual rise through 2026; GTA and Vancouver are the early-warning regions. OSFI

• BoC research updates: Track new staff notes; the July read set the +10% (2025) / +6% (2026) markers we used today. Bank of Canada

• Product mix shifts: BMO notes borrowers are tilting to shorter fixed and variable to ride the easing cycle—this will shape renewal waves beyond 2026.

Bottom line

• The renewal wave is manageable for the system, but material at the household level—most acutely in Toronto where loan sizes are largest.

• Smaller markets offer more payment-shock resilience and cleaner cash-flow math.

• From now to year-end, expect more deals getting done, prices mostly flat to slightly up, and renewal planning to be the difference between stretch and comfort.

Want a postal-code-level renewal game plan (payment delta, rate options, and sell/hold/lease scenarios)? Reply to this email—or book a quick here 

See you next week