45% of Canadians renewing mortgages this year now spend over half their paycheque on housing: Bank of Canada data shows ongoing budgetary strains

Over the next 12 months, the last wave of pandemic-era 5-year fixed mortgages comes up for renewal — about 12% of all outstanding mortgages in Canada. According to the Bank of Canada’s Households Financial Stability report, these homeowners should expect housing payments to increase by 15%, on average.

For renters and first-time homebuyers, these rate-increase headlines can be intimidating, but it turns out the rate increase pain isn’t spread evenly among Canadian homeowners. Here’s what can help as you head into the fall real estate market.

Renewals are already straining half of Canadian budgets

According to the Rates.ca survey, 45% of homeowners who already renewed their mortgage now pay 50% or more of their monthly household budget on housing costs.

Among homeowners who renewed in 2026, 40% locked in a five-year term, 35% chose three years, while 7% opted for a term longer than five years — a sign that current homeowners are hedging against further rate uncertainty.

Not all homeowners face constraints

Not every renewal ended in a higher rate, with 13% of current homeowners negotiating a lower rate, largely because they had locked in near the top of the 2023-24 rate cycle.

Another 14% of renewals, mostly variable-rate and shorter fixed-rate mortgages, will also face little change, according to Bank of Canada data.

The mortgage stress test safety net

The Bank of Canada’s main cushion has been the mortgage stress test — a financial evaluation mandated by the federal government and used by lenders to determine if a borrower can still afford their mortgage payments if interest rates rise (or income drops).

It turns out that more than 90% of homeowners who renewed in the past year did so at rates below what they originally qualified for — when the mortgage stress test would’ve been applied.

Why the mortgage stress test isn’t the safety net it once was

Unfortunately, that cushion doesn’t work as effectively when home equity shrinks.

Given that Canadian home prices have fallen about 5% over the past year and 20% since their 2022 peak, this leaves homeowners with significantly less equity to draw on for refinancing.

For homeowners facing a cash crisis — due to decreased income or higher rates — the diminished equity means fewer options for reducing monthly housing costs.

As a result, Bank of Canada data suggests that approximately 4% of borrowers renewing in 2027 — about 9% in the Toronto area — may not qualify for a new mortgage, at all. These numbers could grow to 7% of mortgage holders across Canada and 12% in the GTA, if housing prices fell another 10%.

Newcomers, younger owners and lower earners are absorbing the brunt

Those in positions with the least-amount of resources may be the hardest hit.

Among homeowners aged 18 to 34 who renewed at a different rate, 90% saw that rate climb, and 56% now say their mortgage eats up 50% to 70% of their monthly budget, with another 6% who pay more than 70% of their household budget on monthly housing costs.

Canadians born outside of the country face a similar squeeze. More than half (56%) now spend 50% to 70% of their income on housing; compare this with homeowners born in Canada, where only a third (35%) report spending more than 50% of their household income on housing costs.

Lower-income households are also feeling the pinch. Among households earning between $60,000 and $100,000 a year, 54% report their mortgage now takes up 50% to 70% of their monthly budget.

What if your budget can’t absorb a rate increase? 3 options for homeowners

For households struggling with the impact of a rate increase, there’s one strategy that can help with cash flow.

According to Bank of Canada staff research, about half of borrowers who choose to extend their amortization by five years can almost eliminate any potential monthly payment increase they face at renewal time.

About 10% of borrowers who held a mortgage in 2022 have already refinanced, and roughly 70% of those homeowners chose to extend amortization by an average of six years, according to Bank of Canada data.

While this solution can ease monthly budget constraints, it comes at a cost. A longer amortization means more interest over the life of the loan — and a longer timeframe before you’re debt-free. Still, it’s an option worth raising with a lender if cash flow and budgetary constraints threaten to derail long-term financial planning or your success as a homeowner.