July 17, 2025
RED FM News Desk
Ontario – A new analysis from the Bank of Canada suggests that six in ten Canadian mortgage holders are likely to face higher monthly payments when their loans come up for renewal in 2025 and 2026 — even as interest rates are projected to gradually decline.
The central bank’s latest staff report indicates that many borrowers are still expected to pay more than they do today, as most existing mortgage contracts were locked in at lower rates during past periods of historically low interest.
The bank estimates that those renewing in 2025 could see their payments rise by an average of 10% compared to their December 2024 levels. For 2026, the average increase is expected to be around 6%.
The degree of financial impact will vary depending on mortgage type. Fixed-rate mortgage holders, particularly those with five-year terms, are expected to see the sharpest jumps, with monthly payment increases of 15 to 20% on average. These borrowers account for approximately 40% of all mortgages in Canada and are the main contributors to the upward trend.
Meanwhile, not all borrowers will be affected equally. For those with variable-rate mortgages that adjust monthly, payments may actually decrease by 5 to 7%. However, those holding variable-rate mortgages with fixed payments could face mixed results. The report projects that 10% of this group could see payment spikes exceeding 40%, while 25% might benefit from decreases of 7% or more.
Financial Stress on Households
The bank’s findings also highlight rising pressure on household budgets. Borrowers experiencing payment increases are projected to see their mortgage debt service (MDS) ratio — the portion of income devoted to mortgage payments — rise from 15.3% in late 2024 to 18% by the end of 2026. By comparison, those whose payments decline will likely see their MDS ratio fall slightly from 19.7% to 18.6%.
These figures assume borrowers’ income levels remain constant, though the Bank of Canada acknowledges many may have seen income growth since their last mortgage renewal, which could offset some of the added financial burden.
Assumptions and Methodology
The projections are based on the assumption that homeowners maintain their current mortgage type and amortization period upon renewal. Future payment estimates also rely on market-implied interest rate expectations as of June 17.
While the overall picture points to increased financial strain, the bank notes that some homeowners may soften the impact by renegotiating terms or adjusting their amortization schedules before renewal.
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