Is Canada's mortgage renewal crisis settling down?

For much of the past three years, Canada’s so‑called mortgage renewal cliff has loomed as a systemic risk. Now a new TD Economics report by Maria Solovieva, CFA, argued that the worst of that shock appeared to have passed, and that the drag on consumer spending from soaring payments started to ease.

Debt service pressures started to ease

According to TD’s internal data, households were devoting a smaller share of income to servicing debt than a year earlier, with the debt service ratio below its 2023 peak.

“The most telling sign that Canadian households have weathered the renewal shock is also the simplest: they are spending less of their income on debt,” Solovieva said.

She said two forces did the heavy lifting: faster‑than‑expected growth in personal disposable income and longer amortizations, which were roughly 16 months longer than before the pandemic. That combination “turned a mortgage ‘cliff’ into a much gentler ‘hill’,” she said.

The structure of the mortgage market also shifted. By 2026, about 73% of outstanding mortgages were either variable‑rate or short‑term fixed, compared with 55% in early 2022. That meant a larger share of the stock reacted quickly as rates fell.

“Recent interest rate cuts should pass through to borrowers more quickly than rate hikes did during the tightening cycle,” Solovieva said.

From cliff to rolling hill of renewals

The report’s conclusion echoes the Bank of Canada’s own work. The central bank estimated that while roughly 60% of mortgages would renew in 2025–26, “we do not expect upcoming mortgage renewals will lead to a severe worsening of financial stress,” provided incomes continue to rise and rates stay below borrowers’ stress‑test levels.

TD’s modelling showed average mortgage payment increases moderating to about 6% in 2026, with a median change near zero as more borrowers roll into lower rates.

The national debt service ratio is expected to edge higher in late 2026, but mainly because of new mortgages attached to higher home prices, rather than renewed pandemic‑era loans.

Mortgage interest costs in the CPI already decelerated sharply, with mortgage interest cost inflation running about 1.2% year‑over‑year in January 2026, down from a peak above 30% in 2023 – a lagging sign of easing pressure.

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Canadians confront complex affordability picture in a turbulent market

Affordability has proven an enormous problem in Canada’s housing market in recent years, whether for first-time homebuyers attempting to purchase a property or plenty of homeowners struggling with a jump in monthly mortgage payments.

With 2026 already underway – and a deep correction at play across many cities’ housing markets, particularly in the condo sector – has that picture improved yet this year?

In January, affordability improved in 12 of 13 major Canadian housing markets, according to Ratehub, although the highest drop in average monthly mortgage payments was still just $100, in Vancouver.

And falling house prices have been a double-edged sword: while lower valuations can present challenges for existing homeowners upon mortgage renewal time, they’ve also opened doors for some first-time buyers who were previously frozen out of the market.

Lenders’ Choice Mortgages broker owner Mike Kazarian told Canadian Mortgage Professional he was starting to see more first-time buyers seeking preapprovals to enter the market in the Greater Toronto Area (GTA).

Those individuals, he said, are taking a flexible approach to their search. “Some people are looking for condos, but people seem to want something a little bigger and they’re willing to go outside of Toronto – whether it be Milton, Burlington, or just outside the GTA,” he said. “It all depends on their expectation.

“If their expectation is that they’re going to qualify for an $800,000 purchase and they only really qualify for a $650,000 purchase, then that’s where the numbers lie. So it’s about creating realistic expectations.”

Homeowners confront headwinds as property values slide

Waning home prices may be good news for hopeful buyers, but they can prove problematic when homeowners renew their mortgage – especially at significantly higher rates than they likely secured five years ago.

That shock means mortgage holders are turning to options including refinancing and extended amortizations to meet their cashflow needs – but in some cases their hands are tied because their property value has declined.

“Their property value may not support the loan-to-value requirements of the lender,” Kazarian said. “For example: you purchased a home for $1 million five years ago and you have an $800,000 mortgage, so 80% loan-to-value. It’s a conventional mortgage.

“But now this property appraises at $900,000 so you can’t switch lenders. You’re held to the lender that you currently have and they may not have competitive rates. I’m also seeing a lot of people who had two family incomes and now they’re down to one income, so they’re not going to qualify for a mortgage either.”

Those challenges are pushing some homeowners back into the rental market because the burden of handling a mortgage is simply too much stress, Kazarian said.

Geopolitical strife continues to weigh down market

Global trade tensions and economic uncertainty poured cold water over hopes of a Canadian housing market rebound in 2025 after a quiet couple of years, and plenty of that unease has stretched into this year.

Kazarian doesn’t see a protracted meltdown in the housing and mortgage sectors, although it’s unclear when the light at the end of the tunnel will arrive for struggling homeowners.

“The reality of it is that real estate always ends up going up. Right now is just a blip,” he said. “We know that inventories are going to be low because there’s not much construction going on.

“So people need to be able to hold on. But is that two, three, four years out? We don’t know.”

And the fact that more first-time buyers are able to afford a property as prices fall means pent-up demand will probably keep a floor under the market, he added.

“I think the resale market should increase. There’s a lot of buyers sitting on the sidelines right now,” Kazarian said. “I’ve had a lot of first-time homebuyers reach out to me, so I think the market is going to pick up.

“As to where prices are going to go – have we hit a bottom yet? Nobody knows. But I think resale prices are going to pick up in the second half of 2026.”

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!

2026 BoC rate hike still unlikely despite possible inflation flareup, says BMO

The prospect of another oil‑driven inflation flareup has revived chatter that the Bank of Canada could be forced back into tightening in 2026.

However, BMO Economics’ Douglas Porter argued that, even in a darker global backdrop, a rate hike this year remains “a very long shot indeed” for a Canadian economy already straining under higher borrowing costs.

Canada’s policy rate sat at 2.25% heading into the spring, with core inflation edging closer to the 2% target even as geopolitical risks and US trade tensions clouded the outlook.

External analysts also highlighted that much of the recent price pressure stemmed from tariffs and energy rather than domestic overheating, and that growth has been modest despite headline resilience.

Oil shock revives stagflation fears

“To think that just one week ago, the biggest concern for markets was something as humdrum as whether AI was going to take all our jobs and ravage the economy in the years ahead. Those were the good old days,” Porter wrote in a recent note titled Life During Wartime.

“The conflict with Iran has abruptly changed the economic outlook, with crude oil prices vaulting more than 35% in the past week alone to above $90/barrel for WTI… The spike has rekindled inflation risks, reduced the odds of central bank rate cuts globally, and is now threatening the global growth outlook.”

“As much as the term ‘stagflation’ has been wildly over‑used in recent years, a true oil price shock would indeed increase the risks of stagflationary forces – higher inflation, weaker growth; not a market‑friendly combination,” he said.

Why BMO still sees a hike as “a very long shot”

Unlike the US Federal Reserve, where markets remain divided over the scale and timing of future cuts, there has been “little debate over the amount of potential rate cuts by the Bank of Canada – even prior to the spike in oil, the consensus was firmly that there would be no move on rates this year,” Porter said.

“If anything, the threat of higher inflation has rekindled chatter of a potential rate hike in 2026,” he added.

“We still view that as a very long shot indeed, with the economy struggling to grow, core inflation moving closer to the 2% target, and USMCA uncertainty still clouding the outlook.”

Trade talks under the Canada–US–Mexico Agreement (CUSMA) review framework has finally restarted after a four‑month pause, with minister Dominic LeBlanc travelling to Washington as Ottawa warned that annual reviews and deliberate uncertainty are now on the table.

“One optimistic view is that the Iran conflict makes a deal more likely… But given the choppy U.S.-Canada relations over the past 14 months, there are clearly many less favourable possibilities as well,” Porter said.

“We continue to err on the side of caution on the outlook for USMCA (i.e., prolonged uncertainty) in our Canadian economic forecasts.”

Mortgage market faces renewal grind, not another shock

For mortgage professionals, the key question is how long rates stay restrictive, not whether the BoC delivers a surprise hike next year.

Roughly 60–70% of Canadian mortgages are expected to renew by the end of 2026, with many borrowers still facing payment increases compared with ultra‑low pandemic‑era rates.

Brokers already cast 2026 as a “reset year”, shifting from rate predictions to managing affordability pressure, renewal shock and a growing reliance on alternative and private solutions as more files move out of the narrow prime box.

The “great renewal” shows more than two million mortgages set to renew between 2024 and 2026, a 57.7% year‑over‑year surge in Q1 2025 originations driven by renewals and refinances, and growing payment stress in higher‑priced provinces such as Ontario and British Columbia.

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!

Another month, another slump for Toronto’s condo market

On this day four years ago, the average price of a condo across the Greater Toronto Area (GTA) sat just below $800,000, having skyrocketed amid the buying frenzy of the COVID-19 pandemic.

It seemed the market was on an unending upward trajectory, with record-low interest rates helping fuel an enormous year-over-year increase in prices as investors rushed to snag a rental unit.

But now, new data from the Toronto Regional Real Estate Board (TRREB) shows the average price has tumbled to $626,650 – a dive of about 21.7% from its 2022 peak – as the stunning correction at play in the city’s condo market continues.

GTA condo sales last month slid to 1,088, a drop of more than 60% from the same time four years back, as investors and other buyers continued to desert the market in droves.

Other property types – detached, semi-detached, and townhouses – are also seeing activity and prices contract sharply as economic unease and affordability challenges take their toll.

Still, none have been as dramatic as the condo market’s woes, which aren’t expected to end anytime soon.

Despite some cause for optimism in certain pockets of the Toronto real estate market, mortgage broker-owner Mike Kazarian of Lenders’ Choice Mortgages doesn’t see green shoots in 2026 for the condo sector – even though it will eventually recover.

“A lot of builders have stopped construction so inventories are going to be lower, and where are we going to house people?” he told Canadian Mortgage Professional. “That’s going to be the problem in the next three, four years. So I think the condo market will turn around – but that’s going to take time.”

Builders, investors in the lurch as condo crunch continues

In February 2022 in Toronto, 784 condos were sold in a price range between $700,000 and $799,999. By last month, the number of condos sold in that range had slipped to just 88, with an ever-growing number of condos in the $300,000 to $499,999 window.

Plunging values are creating much-publicized problems for buyers who purchased preconstruction condos years ago, only to find that the property is worth much less than they agreed to pay.

If a lender isn’t willing to offer a so-called blanket appraisal, that can potentially leave buyers on the hook for huge amounts of money – up to hundreds of thousands of dollars in some cases – as they scramble to make up the difference between the sale price and what lenders are willing to fund.

“The most common solutions are: A, they’ve got to come up with cash,” Kazarian said. “If they can’t come up with the cash, which is not always easy… some people are just going to have to walk away and they’re going to get sued by the builder. And that’s really unfortunate.”

Others still are going back to the builder in an effort to negotiate a lower price, knowing that those companies also face challenges when a growing number of buyers in a building suddenly can’t qualify for a mortgage.

Toronto condos continue to weigh down overall national outlook

The sluggishness of Toronto’s condo market means the city continues to drive a wider slowdown in housing across the country, with other regional markets faring better.

Part of the reason for the sector’s recent malaise has been a jump in interest rates since 2022, spiking the cost of borrowing and – as rents continue falling – suddenly turning many investment properties into a cashflow-negative burden for owners.

A drop in the federal government’s immigration targets has also curbed rental demand and removed some buyers from the market.

“It’s ironic, because we had a housing shortage until the government decided to reduce the number of immigrants,” Dominion Lending Centres (DLC) chief economist Sherry Cooper told CMP in late February. “And the population growth has just plummeted, which is never good for housing either.

“So it’s a combination of many factors. And the one that gets the least attention and probably deserves the most attention is this sudden shift in population growth. Because much of what was built was purpose-built rental.”

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!

Builder slump deepens housing crisis

 Canada’s residential construction industry has been adding workers but losing ground on productivity, a new Statistics Canada study found, intensifying pressure on already stretched housing affordability.

The report showed labour productivity in residential building construction fell 37.3% between 2001 and 2023, even as the broader business sector posted gains.

Smaller firms with fewer than 20 employees accounted for most of that decline, while Ontario alone contributed roughly two thirds of the national drop in productivity.

“It is estimated that Canada requires a massive increase in housing starts to meet demand and improve affordability by 2035,” the study said, citing Canada Mortgage and Housing Corporation (CMHC).

“Labour productivity growth in Canada’s construction sector has been slow and has lagged compared with that of other business sectors over the last 20 years.”

Nationally, latest CMHC index showed homeownership affordability hit its weakest point since the 1990s in the second quarter of 2022 before conditions improved modestly.

CMHC’s data traced three distinct waves of erosion beginning in 2001, with the latest – from 2020 to 2023 – no longer driven only by Toronto and Vancouver but by fast‑tightening conditions in Ottawa, Montréal and Halifax as remote‑enabled households moved into those markets.

“Increasing the efficiency of construction is the long term key to improving housing affordability,” Aled ab Iorwerth, CMHC deputy chief economist and a co‑author of the report, said in a CTVNews.ca interview.

“It’s not going to be a quick process. It’s going to take years of consistent building of more housing.”

Small builders, big drag

StatCan defined small firms as those with fewer than 20 employees and found they provided 66.1% of jobs in 2023.

Firms with fewer than five employees alone accounted for 22.4 percentage points of the overall 37.3% productivity decline, while those with five to 19 workers added another 16.1 points.

ab Iorwerth, added that many small companies focused on single detached homes that were “relatively easy to build” and had changed little in a century.

“There hasn’t been a lot of innovation in building single detached housing, its built now the same way it was 100 years ago,” he said.

Ontario’s slump, B.C.’s exception

Ontario’s firms were responsible for 24.7 percentage points of the productivity decline, and it was the only province where productivity fell across all firm sizes.

British Columbia was the sole province that made a positive contribution – mainly because its share of construction jobs grew – even though individual firms there also struggled to keep productivity rising.

Broader warnings for mortgage professionals

The StatCan findings echo a previous CMHC research which found that post‑2019 productivity losses added an estimated $6 billion to $8 billion to construction costs and contributed up to one fifth of new home price increases.

"Doubling the pace of housing construction in Canada is achievable, but not without a significantly larger and modernized workforce, more private investment, less regulation, fewer delays, and lower development costs," ab Iorwerth said at the time.

He urged builders to “deploy the latest technologies … use materials in a better way” and invest in higher‑skilled workers, while pointing to countries such as Singapore and Japan that pushed industrialized building and robotics.

“I think what is happening in the industry is that demand for housing is increasing and that supply is just being met by hiring more and more workers,” he said.

His concern is that companies are “not improving their processes” and are instead “just buying more labour,” rather than turning to prefabrication, economies of scale and digital tools to lift output per worker.

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!