If you bought a home or refinanced during the rock-bottom interest rates of 2020 or 2021, your mortgage term is likely expiring soon. Your mortgage renewal is soon, and you are part of what economists are calling the “renewal wave” where nearly 60% of all Canadian mortgages are set to renew by the end of 2026.
While interest rates have come down from their 2024 peaks, the reality is that most homeowners considering their mortgage renewal in 2026 will face higher monthly payments.
The good news? New rules and stabilizing rates offer more strategic options than we’ve seen in years.
The 2026 Landscape: What the Data Says
Before diving into strategies, it is important to understand the financial environment.
Interest Rate Forecast
By 2026, the Bank of Canada’s policy rate is expected to have stabilized. Analysts predict the overnight rate will settle near 2.25% – 2.75%, bringing variable mortgage rates down significantly from their highs. Meanwhile, 5-year fixed rates are forecast to hover in the 3.8% to 4.2% range.
Mortgage Renewal “Payment Shock” Reality
The biggest concern for 2026 is payment shock. Homeowners renewing a 5-year fixed mortgage from 2021 could see their monthly payments increase by 15% to 20%.
Table: Potential Monthly Payment Increase (Assumed $500k Mortgage)
| Scenario | Original Rate (2021) | Renewal Rate (2026 Est.) | Monthly Payment Impact |
| 5-Year Fixed | 2.00% | 4.00% | +$500 to +$600 / month |
| Variable | 1.45% | 3.75% | +$600 to +$750 / month |
Top Strategies for a Successful Mortgage Renewal
1. Leverage the “Stress Test” Loophole
In late 2024, a significant regulatory change occurred that benefits you in 2026. Lenders are no longer required to apply the “stress test” (qualifying at a rate +2% higher) for uninsured mortgage switches.
- What this means: Previously, you might have been “stuck” with your current lender because you couldn’t qualify for a new loan at 7%+. Now, you can shop around and move your mortgage to a new lender offering a lower rate without requalifying under those harsh rules.
- Strategy: Do not auto-renew. Use this newfound freedom to aggressively shop your renewal offer against at least 3 other lenders.
2. 3 Year vs 5 Year Mortgage Renewal Term
Should you lock in for long-term stability or bet on rates dropping further?
- The 3-Year Fixed Strategy: Many experts recommend a 3-year term for 2026 renewals. This protects you from immediate volatility but ensures you aren’t locked in at ~4% for too long if rates trend back down toward the neutral range of 3% in the late 2020s.
- The Variable Strategy: With the Bank of Canada in a rate-cutting cycle, variable rates are becoming attractive again. If your budget can handle slight fluctuations, a variable rate might end up being cheaper over the life of the term than a fixed rate.
3. Start the Process 120 Days Early
Most lenders allow you to “lock in” a renewal rate 120 days (4 months) before your maturity date.
- Why do this? If rates rise before your renewal date, you are protected. If rates drop, you can usually negotiate down to the lower market rate. It is a risk-free insurance policy.
- Also, don’t only speak with one lender. We suggest going to a broker, getting a great rate, then going to your current lender and asking them to match or do better.
4. Prepayments are Your Best Friend
If you have any cash reserves, making a lump-sum payment before you renew is the most effective way to combat higher rates.
- The Math: On a $400,000 mortgage, a $20,000 lump sum payment at renewal (reducing the principal to $380k) can save you roughly $120 per month in payments at a 4.5% interest rate. It acts as a direct counter to the rate hike. Of course, you would need to have the cash to do this in the first place.
5. Watch Out for “Income-Producing” Rules
If you own a rental property, be aware that OSFI (the banking regulator) has tightened rules for 2026 regarding “Income-Producing Residential Real Estate.” Lenders can no longer “double count” income if you have multiple properties. If you are a real estate investor, you need to speak to a broker to ensure you still qualify for a standard renewal.
Conclusion: Don’t just Sign the Letter
Your lender will send you a renewal letter in the mail hoping you will simply sign it and send it back. Do not do this. That letter is an opening offer, and in 2026, you have more negotiating power than you think.
By starting early, shopping your rate, and choosing the right term length, you can minimize the impact of the renewal wave and keep your financial goals on track.
Disclaimer: This article provides general information and does not constitute financial advice. Mortgage rates and regulations are subject to change. Please consult with a qualified mortgage professional for your specific situation.
