The mortgage refinancing landscape in Canada is more treacherous than many homeowners realize, especially as they approach mortgage renewal. A recent Bank of Canada (BoC) report highlights a concerning trend: a growing number of borrowers, particularly in the Greater Toronto Area (GTA), are finding themselves unable to refinance at renewal, contrary to their expectations.
The BoC's Financial Stability Report estimates that approximately 9% of borrowers in the GTA will struggle to refinance in 2027, even at current home prices. This figure rises to 12% if home prices drop by another 10%. Nationally, the situation is less dire, with 4% of borrowers facing refinancing challenges. These numbers underscore the reality that many homeowners are discovering when they approach mortgage renewal.
Leah Zlatkin, a licensed mortgage broker, echoes this sentiment. She observes that homeowners who bought when property values were higher or have accumulated significant consumer debt often find their refinancing options more limited than anticipated. Income changes, such as parental leave or retirement, can further exacerbate the situation, making it difficult for borrowers to qualify for new loans.
The BoC's data provides a grim picture of the mortgage landscape in Toronto. Mortgage arrears of 60 days or more among high-loan-to-income ratio borrowers in the GTA reached 1.33% in March 2026, a significant increase from 0.78% the previous year. This is well above the 2018-2019 average of 0.1%. The decline in home prices, which are now roughly 20% below their March 2022 peak, has eroded the equity buffers many homeowners relied on.
While the overall mortgage renewal situation in 2026 may not be as dire as once feared, the BoC data reveals stress concentrations among those with substantial debt or properties in softening markets. Leah Zlatkin identifies five key reasons why refinancing becomes more challenging than borrowers expect:
- Equity Erosion: Home value drops, combined with loan-to-value limits, can reduce available equity, even for those with consistent payment histories.
- Consumer Debt: Debt accumulated after purchase, such as credit card balances, narrows borrowing capacity at renewal.
- Income Changes: Shifts in income, whether due to parental leave, self-employment, reduced hours, or retirement, can affect borrower qualification.
- Lender Switching Complexity: Homeowners may need to meet current lender qualification requirements even if they switch lenders.
- Late Planning: Income, debt levels, and home values can change before renewal, making early understanding of borrowing limits crucial.
Zlatkin emphasizes the importance of early planning and understanding one's financial position before approaching mortgage renewal. She advises homeowners to reassess their financial situation well in advance to ensure they have the best chances of securing favorable refinancing terms.
