10 per cent of Toronto mortgage holders could have trouble refinancing. Experts say its a ‘death spiral’ for many
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The Bank of Canada is warning that a wave of mortgage renewals within the next year or so could put some households under financial strain, with around 10 per cent of borrowers in Toronto potentially unable to refinance at renewal.
The central bank laid out its concerns in a recently released Financial Stability Report in which it says “households, businesses and banks have remained resilient. But vulnerabilities are building in some parts of the system.”
“Over the past 12 months, borrowers who took out a mortgage at very low interest rates during the pandemic have been renewing at higher rates,” the report states. “Many mortgage holders faced higher payments at renewal in 2025 and in the first half of 2026, but most have been able to manage the increase.”
It goes on to say that mortgage arrears have risen more among borrowers with large mortgage balances relative to their income. While those borrowers represent about 17 per cent of outstanding mortgage balances across Canada, the report states “stress is most acute among Toronto area borrowers who took out a mortgage in 2022–23.”
The percentage of mortgage accounts in arrears for 60 days or more among Toronto mortgage holders with a high Loan-to-Income (LTI) ratio was up sharply in March 2026 (1.33 per cent) compared to a year earlier (0.78 per cent). That’s way up from the 2018-2019 average of 0.1 per cent.
Over the next year, the last of the five‑year, fixed‑payment mortgages taken out during the pandemic will renew, representing about 12 per cent of all outstanding mortgages in Canada, the BOC report says. Those borrowers can expect to see their payments increase by about 15 per cent, the bank notes.
The report says that while strong income growth over the past five years should help most borrowers to manage the higher payments, those who have not seen much income growth could have difficulty because the decline in home prices has reduced their equity and made refinancing more difficult.
At current home prices, the central bank says, an estimated four per cent of borrowers across the country would not be able to refinance at renewal in 2027, but that number would be around nine per cent of borrowers in the Greater Toronto Area.
“If home prices were to fall by another 10 per cent, that share would rise modestly to about seven per cent nationally and 12 per cent in the Toronto area,” the BOC report states.
Rising mortgage payments come as many households struggle with the rising cost of living, with inflation and other economic factors driving up the price of food, fuel and other essentials.
The bank also warned in its report that some “highly indebted households” have little savings or financial flexibility to cope with an unexpected life event.
“If job losses were to rise, households without sufficient savings could fall behind on mortgage and consumer credit payments,” the bank says.
‘Death spiral’ for those affected
The growing crunch of borrowers squeezed by mounting financial pressures is not just a theoretical projection for those on the front lines.
“It’s very real. We see it in our practice, we understand that it’s true, we can see it’s growing, we run into it basically on a daily basis in our mortgage practice,” GTA Mortgage Broker Ron Butler told CP24.com.
He says an inability to renew can be devastating for those who find themselves in the situation.
“It’s a death spiral for the people who are affected by it,” Butler says.
He explained that people who are unable to re-qualify are also unable to draw additional equity from their homes to help get through a financially difficult period.
“You’re stuck because the price of your home has fallen to the point where it’s too close to your mortgage amount, it may even be at your mortgage amount, or my God, it may even be less than your mortgage amount.”
If one is unable to requalify, they are also unable to shop around for a better rate than what their original lender might be offering.
“You can’t refinance to pay off your debts. If you’ve run into some problems and you’d really like to get some money out of your house, you can’t do it,” Butler says. “If you want to shop around for a mortgage, you cannot shop.”
But importantly, he notes Canadian borrowers can almost always renew their mortgage by signing a simple renewal agreement with their original lender at the latest rates they’re offering if they are in good standing. Renewing with your original lender does not require one to re-qualify.
“Our history in this country is that as long as you pay on time, as long as your property taxes are paid, as long as your house insurance is paid, you will always be offered a renewal,” he says.
Rates.ca Real Estate and Mortgage Expert Victor Tran echoes that idea and says not being able to re- qualify does not necessarily mean that someone will lose their home.
“They can still have a mortgage if they stay with the current lender because if they simply just renew the mortgage with the same lender and not request more money, then there’s no appraisal required,” Tran says. “And most often they don’t even need to run a credit check or confirm income; they simply present available rates at the time of renewal, they sign a document, and they can call it a day.”
That’s the advice Tran says he recently gave a client who was up for renewal, but had recently lost his job.
“He’s in the automotive manufacturing industry. He got laid off in the beginning of the year, and his renewal is coming up,” Tran says.
Worried that he might not re-qualify if he shopped around for different rates, Tran advised him to simply sign a renewal with his current lender.
Mortgage experts say that while some lenders require borrowers to inform them of a change to their employment status, there tends to be a “don’t ask don’t tell” status quo around the issue as long as borrowers continue to make their payments.
If one is unsure whether they would re-qualify as they approach their renewal date, a mortgage broker could be a good source of advice as they can provide guidance without borrowers feeling like everything they say will go into a note on their file.
What to do if you might not requalify
Still, mortgage experts say that those who may have difficulty re-qualifying or may have difficulty making their payments at a higher rate after renewal with their current lender should be proactive about the situation.
“If a homeowner is facing any type of financial difficulty, and they foresee an issue coming up of not being able to make a payment, or if they’re late for a payment, it’s best to just be proactive,” Tran says. “Reach out to the lender and see if they can work out some sort of payment plan, or even skip a payment.”
Ultimately, Butler says, lenders want to see borrowers stay in their homes as mortgage defaults can be costly and lengthy affairs for them.
He stresses that while they don’t have infinite room to be lenient, lenders will usually try to work with a borrower who’s experiencing financial difficulty if there’s a way to do so.
While he says the vast majority of homeowners will not likely find themselves in this situation, he says the 10 per cent or so that do may find themselves in an increasingly difficult spot, unable to get money out of their homes at a time when things have become more expensive than ever before.
In an environment of high unemployment and declining property values, Butler warns, some people could calculate that it’s not worthwhile to hang on to their homes.
“We’re hearing this from people, we’re hearing this from people saying it’s much cheaper to rent, so maybe I should just get out of this thing. Okay, yeah, I should just walk away. So that’s where I say there’s a danger,” he says.
He notes Canada tends to have safeguards, such as mortgage stress tests, to prevent that sort of thing happening in a broad way.
But reality is still hitting home for many people who bought when the market was much better. That includes one client of his, a real estate agent, who has seen his commissions evaporate over the past three years or so and may lose his home.
Even if home prices do rebound in some areas, Butler says, the chances of a spectacular rebound across the market remain low for the time being.
“The dog crate condos are not going to suddenly become valuable again, right? Not gonna happen. That could take 10 years.”
Joshua Freeman
Journalist, CP24.com
