By TD Economics

• An average mortgage holder who has recently renewed, or is about to, is likely absorbing an increase in monthly payments. Media headlines are raising alarm bells that the ongoing wave of mortgage renewals is a looming “shock”. So, it may come as a surprise to learn that aggregate mortgage payments in Canada are actually declining. Let’s unpack how both dynamics can be true at the same time.
• First, the part that’s well understood: many households are facing higher payments. The most popular mortgage term is five years. So as an example, a borrower with a $500,000 mortgage who locked in a 2.5% mortgage rate in June 2020 would now be renewing at a rate closer to 4.0%, with monthly payments rising by about $320. According to a Bank of Canada report published earlier this year, about 60% of outstanding mortgages will renew by the end of 2026, and 40% are expected to renew at higher rates. This is the looming mortgage shock the media is warning about.
• Yet nationally – as odd as it may sound – aggregate mortgage payments are on the decline, driven by lower mortgage rates. We forecasted this in our November 2024 report, and the data has since confirmed the outcome. In the final two quarter of last year, mortgage interest payments declined by an average of 1.7%, providing enough relief to push total mortgage payments into contraction. How can this contradiction seemingly exist? The answer lies in the composition.

https://economics.td.com/ca-mortgage-renewals