About nine per cent of Toronto-area homeowners will be unable to refinance their mortgages upon renewal next year, more than double the national average of four per cent, according to the Bank of Canada's Financial Stability Report 2026.
Key findings from the Bank of Canada report
The central bank attributes the heightened risk in Toronto to declining home values, elevated interest rates, and high household debt levels. Many Toronto households have debt-to-income ratios that leave them vulnerable to cost increases or job loss, the report notes.
Nationally, homeowners with five-year fixed-rate mortgages expiring in 2027 make up about 12 per cent of all mortgages in Canada. These borrowers face an average 15 per cent increase in monthly payments due to higher interest rates, the Bank of Canada added.
Impact of falling home values
TD Economics, in a related analysis, highlighted that Greater Toronto Area home values have dropped 26 per cent from their 2022 peak. This decline has pushed some borrowers below the 80 per cent loan-to-value threshold typically required to refinance, making it harder to secure better rates or terms.
“Most renewers will be able to refinance, but Toronto borrowers face more of a challenge because of the significant decline in real estate values, especially for condominium apartments in recent years,” TD Economics stated.
Options for affected borrowers
TD Economics noted that borrowers who cannot refinance may still renew their existing mortgage with their current lender, though they may struggle to find more favourable terms. Refinancing often involves restructuring the loan by extending the amortization period or rolling higher-interest credit card debt into the mortgage.
The Bank of Canada report underscores the broader financial strain on Canadian households, with many facing payment shocks as mortgages come up for renewal in a higher-rate environment.
