Fads come and go.\u00a0 So too do talking points and topics of discussion.<\/p>\n
If you regularly consume news and media, you\u2019ll notice that the \u201chot-button issues\u201d eventually fade away and that mass hysteria can turn to calm.<\/p>\n
Over the years, we\u2019ve seen a\u00a0lot<\/em> of these hot-button topics, issues, and buzz-words come and go in the real estate world.<\/p>\n Remember when \u201cforeign buyers\u201d were responsible for every problem in the real estate market?<\/p>\n How about all the chaos that \u201cshadow flipping\u201d caused, all the articles written about it, and how the notion simply faded out of our minds completely?<\/p>\n I\u2019m not here today to douse water on a smoldering fire, nor am I going to create a classic \u201ceverything is fine, nothing to see here\u201d type argument, but I\u00a0will<\/em> ask the following question in hopes that you\u2019ll provide both subjective and objective answers:<\/p>\n Was too much made of the \u201cmortgage renewal cliff\u201d?<\/p>\n<\/blockquote>\n I\u2019m all ears.<\/p>\n For those not in the know, perhaps a brief refresher?<\/p>\n Well, in simplest terms, there was this thing called the\u00a0COVID-19 pandemic<\/em> that, um, \u201ctinkered\u201d with the economy just a wee bit.<\/p>\n In response to a worldwide crisis, the likes of which our planet had never seen, central banks absolutely slashed interest rates.\u00a0 In Canada, our overnight lending rate went from 1.75% to 0.25% virtually overnight.<\/p>\n In April of 2020, that 0.25% overnight lending rate led to some of the lowest mortgage rates we had seen in our lifetimes.<\/p>\n And the Bank of Canada didn\u2019t\u00a0increase<\/em> interest rates for almost two years; it was March of 2022 that we saw the first rate hike.<\/p>\n Here\u2019s a look at the overnight lending rate from 2019 through the height of rates in 2023:<\/p>\n Here\u2019s a fun game: what is the lowest five-year fixed-rate mortgage that\u00a0anybody<\/em> you know was able to secure?<\/p>\n A client of mine had a five-year fixed-rate of 1.29%.<\/p>\n That\u2019s absurd.<\/p>\n I mean, 1.49% is absurd, and 1.79% is absurd, and based on\u00a0today\u2019s<\/em> prevailing rates, we could suggest that 2.99% is absurd.\u00a0 For anybody who\u2019s first foray into the real estate market began during the last twelve months, it\u2019s tough to comprehend these rock-bottom rates.<\/p>\n And perhaps that\u2019s part of the reason for the hysteria about the \u201cmortgage renewal cliff.\u201d<\/p>\n Unprecedented times can lead to unprecedented consequences.<\/p>\n The thinking essentially went like this:<\/p>\n For people who secured five-year, fixed-rate mortgages in 2020 and 2021, a financial reckoning would arrive in 2025 and 2026.<\/p>\n<\/blockquote>\n Just imagine purchasing a $1,500,000 home in 2020 and obtaining a 1.89%, five-year, fixed-rate mortgage that resulted in a $4,365.32 per month payment (on a 30-year amortization with 20% down).<\/p>\n Now, imagine the worst-case scenario: prevailing interest rates are 7% upon renewal in 2025.<\/p>\n Suddenly, that manageable $4,365.32 per month mortgage payment increases to $7,903.24.<\/p>\n That\u2019s an 81% increase overnight.<\/p>\n This<\/em> is why so many people worried about the \u201cmortgage renewal cliff\u201d as interest rates began to increase in March of 2022.<\/p>\n The rate of increases by the Bank of Canada was unprecedented.<\/p>\n From March of 2022 through July of 2023, there were ten<\/em> interest rate increases as follows:<\/p>\n And while borrowers who signed mortgage commitments in 2020 and 2021 continued to benefit from historically-low interest rates, economists and the media began to opine on what these drastic actions by the Bank of Canada meant.<\/p>\n At first, the discussions were about those\u00a0variable<\/em>-rate holders:<\/p>\n \u201cCanadians\u2019 High Mortgage Debt A \u2018Ticking Time Bomb\u2019 As Renewals Loom\u201d<\/a> But over time, and as the variable-rate holders began to absorb the cost of increasing interest rates, the discussion turned to those\u00a0fixed-<\/em>rate mortgage holders who would be renewing en masse in 2025 and 2026.<\/p>\n Here\u2019s one of the first articles on the subject in a major Canadian newspaper which uses either the term \u201cmortgage renewal shock\u201d or \u201cmortgage renewal cliff,\u201d with this one using the former:<\/p>\n \u201cCanada\u2019s Economy Faces $900 Billion Mortgage Renewal Shock\u201d<\/a> Between 2024 and 2026, an estimated $900-billion worth of Canadian\u00a0mortgages\u00a0\u2013 almost 60 per cent of all outstanding mortgages at chartered banks \u2013 are due to renew and could face a sharp increase in payments, according to a report released this week by Darko Mihelic, an analyst who covers the banking sector for RBC Capital Markets. Those payment increases range from a weighted average of 32 per cent next year to 48 per cent in 2026.<\/p>\n The focus of the report is the impact the payment shocks will have on the retail operations at Canada\u2019s big banks, but the economic fallout is obvious if the current interest rate environment persists.<\/p>\n The biggest shock awaits fixed-payment,\u00a0variable-rate mortgages\u00a0set to renew in 2026. A five-year variable mortgage renewing that October would see payments jump 76 per cent if mortgage rates stayed around 6 per cent. A one-percentage-point drop to 5 per cent would ease the payment shock, but only to 63 per cent. \u201cInterest rates would need to decline significantly to \u2018save\u2019 this cohort,\u201d the report says. Even if the Bank of Canada were to slash its benchmark rate to 0.25 per cent by that year, payments for variable-rate mortgages as a whole would still shoot up 20 per cent.<\/p>\n<\/blockquote>\n In my \u201cworst-case\u201d scenario above, I noted the potential for an 81% increase in mortgage payments.\u00a0 This article touts a potential 76% increase and an \u201ceasing\u201d to only a 63% increase if mortgage rates declined from 6% to 5%.<\/p>\n The word \u201cshock\u201d turned into \u201ccrisis\u201d not long after:<\/p>\n \u201cDavid Rosenberg: Canada\u2019s Menacing Mortgage Math Means Crisis Looming\u201d<\/a> From the article:<\/p>\n The macroeconomic math relating to Canada\u2019s looming wall of mortgage renewals should be terrifying for the\u00a0Bank of Canada. A large increase in average monthly mortgage payments will arise from the nearly $1 trillion in renewals due by 2026, triggering, in turn, a large demand shock and putting stress on the\u00a0housing market\u00a0in particular and the economy in general. The central bank will need to ease aggressively before the shock strikes to avoid turning a slowdown into a crisis, positioning Government of Canada bonds for outperformance in 2024.<\/p>\n<\/blockquote>\n As this article was written by David Rosenberg, there\u2019s a \u201ccall to action,\u201d so to speak.<\/p>\n Like Benjamin Tal has for the last couple of years, David Rosenberg was among many economists who suggested that the Bank of Canada needed to act faster and more aggressively.<\/p>\n \u201c\u2026to avoid turning a slowdown into a crisis\u201d is quite telling, and the sub-headling to the article read, \u201cBank of Canada will need to cut rates to prevent slowdown from becoming a meltdown.\u201d<\/p>\n Later in the article:<\/p>\n This looming \u201cmortgage renewal cliff\u201d is common knowledge in Canada, but nobody has followed the macroeconomic math through to its full conclusion. We triangulated various data sources to trace the impact of mortgage renewals through the system. While perfect accuracy is impossible, the broad direction and magnitude of the impact are both knowable and alarming.<\/p>\n Combining the data from the Bank of Canada\u2019s most recent Financial Stability Review with\u00a0Canada Mortgage and Housing Corp.<\/a>\u00a0(CMHC) data on average balances, we confirm that around two-thirds of mortgages (by value) will renew by 2026. The distribution is somewhat backloaded, with a bit more than half coming in 2024 and 2025, and the remainder in 2026. We can use the rise in average monthly mortgage payments that has already happened since the beginning of the hiking cycle to get a sense of how this will affect consumers.<\/p>\n In February 2022, the average monthly mortgage payment was $1,460. It\u2019s now above $1,900, an increase of more than 30 per cent, according to the latest CMHC data. Since that figure includes a sizable number of floating-rate mortgages that fixed their interest rate in early or mid-2022 (partway into the hiking cycle), that\u2019s a conservative starting point for assessing the impact of coming renewals (who will face even higher rates). Based on the share of households due to renew, we calculate the average monthly mortgage payment will rise by a further 15 per cent by the end of 2024, 30 per cent by the end of 2025 and 45 per cent by the end of 2026.<\/p>\n<\/blockquote>\n Here they even\u00a0quote<\/em> the term \u201cmortgage renewal cliff\u201d and describe it as \u201ccommon knowledge.\u201d<\/p>\n Common knowledge is one thing, but\u00a0certainty<\/em> is another.<\/p>\n Surely there was common knowledge of a\u00a0potential<\/em> mortgage renewal cliff, but were we to simply take this as a given?<\/p>\n The media blitz continued into 2024:<\/p>\n \u201cWhy Banks Are Bracing For A Mortgage Renewal Cliff\u201d<\/a> This is a 15-minute video that\u2019s worth viewing if you have time, but here\u2019s the description:<\/p>\n Canada\u2019s Big Six banks are adding billions of dollars to their emergency funds as mortgage renewals approach for more than three-quarters of homeowners.\u00a0 Andrew Chang explains why the banks are preparing for more delinquencies, and who\u2019s most at risk.<\/p>\n<\/blockquote>\n But by the fall of 2024, the narrative changed.<\/p>\n Significantly<\/em>, I might add.<\/p>\n Here\u2019s the first article I can find to that effect:<\/p>\n \u201cRate Cuts To Smooth Over The \u2018Mortgage Renewal Cliff\u2019 Awaiting Pandemic Homebuyers\u201d<\/a> From the article:<\/p>\n A rapid decline in borrowing costs would shrink the gap between the exceptionally low mortgage rates that many homeowners secured in 2020 and 2021, during the early stages of the COVID-19 pandemic, and the higher rates available that many of those borrowers will have to sign up for in 2025 and 2026 when their loans roll into a new term.<\/p>\n \u201cNow that we\u2019re in the midst of a relatively rapid rate-cutting cycle, we believe\u00a0mortgage\u00a0<\/a>renewals will be much more manageable,\u201d Royce Mendes, managing director and head of macro strategy at Desjardins Securities, said via e-mail.<\/p>\n<\/blockquote>\n Ah, I see.<\/p>\n \u201cMuch more manageable,\u201d you say?<\/p>\n Well, by the time this article was written, the Bank of Canada had already cut the lending rate\u00a0three<\/em> times and there were rumours of \u201cjumbo\u201d cuts on the horizon.<\/p>\n In fact, only twenty days after this article was written, we saw the first of\u00a0two\u00a0<\/em>successive \u201cjumbo cuts\u201d of fifty basis points.<\/p>\n The narrative continued from there:<\/p>\n \u201cCanada Retreats From The Edge Of The Mortgage Renewal Cliff\u201d<\/a> The sub-title reads, \u201cLower interest rates and actions of diligent homeowners mean \u2018renewal shock is not as worrisome\u2019<\/p>\n \u201cWe anticipated that consumers could withstand the sticker shock of renewing historically low-rate mortgages at decade-high rates,\u201d TD Economics said in the report. \u201cA year later, things have gone better than expected.\u201d<\/p>\n TD Bank is now estimating that \u201caggregate payments,\u201d which represents the \u201cbalance of Canadian mortgages outstanding at mid-2024\u201d will fall by 1.2 per cent in 2025, instead of rising by 0.5 per cent, as previously predicted by TD.<\/p>\n The bank called that a \u201csignificant easing.\u201d<\/p>\n<\/blockquote>\n Oh, well, that certainly sounds different than the tune sung one year ago!<\/p>\n And to what do we attribute this change in outlook?<\/p>\n Is it simply the Bank of Canada cutting interest rates?<\/p>\n Not exactly.<\/p>\n From the article:<\/p>\n The big bank estimates that 14 per cent of variable mortgages at the end of 2022, representing $520 billion, were switched to either fixed-rate mortgages or were prepaid, meaning homeowners increased payments or paid a lump sum.<\/p>\n \u201cThe renewal shock is not as worrisome,\u201d said Maria Solovieva, an economist with TD Economics, who also noted that among those renewing are people who signed up for short-term deals and will likely now renew at a lower interest rate.<\/p>\n<\/blockquote>\n Oh, wow, credit people for actually being\u00a0financially responsible<\/em>!\u00a0 Who would have thought?<\/p>\n Then along came 2025 and even more interest rate cuts:<\/p>\n Seven interest rate cuts from 5.00% to 2.75% is hardly in line with the\u00a0ten<\/em> interest rate\u00a0increases<\/em>, from 0.25% to 5.00%, but it most certainly helps us \u201cretreat\u201d from the mortgage renewal cliff or crisis that has been discussed over the last two years.<\/p>\n As it stands now, it\u2019s exceptionally important to note the following:<\/p>\n Fixed-rate mortgages are now available in the low-4% and even high-3% range.\u00a0 This is less than the rates at which borrowers were being stress-tested in 2020 and 2021, which were between 4.79% \u2013 5.25%.<\/strong><\/span><\/p>\n Say what you want about the stress test being able to predict a borrower\u2019s ability to service a higher mortgage in the future versus the borrower\u2019s\u00a0actual\u00a0<\/em>ability to do so, but the point can\u2019t be denied: these borrowers were tested\u00a0and<\/em> approved for these market conditions.<\/p>\n Not only that, banks have been much more aggressive when it comes to\u00a0retaining<\/em> existing business than ever before.<\/p>\n Once upon a time (and I would say it\u2019s almost always been the norm<\/em>\u2026) banks treated existing clients worse than new clients simply because the banks\u00a0expected<\/em> to retain existing clients and felt they needed to offer better terms and better service to attract new business.<\/p>\n This is why I\u2019ve always told people to work with a mortgage broker who can \u201cshop\u201d them to all the major lenders and surely secure better terms than their existing bank will give them, whether they\u2019re already a mortgage-holder or whether they\u2019re buying their first home, but feel the bank will treat them well because they\u2019ve had their chequing account with the bank since they were 14-years-old.<\/p>\n So here we are in 2025 with banks doing this crazy thing:\u00a0providing better terms to existing clients<\/em>.<\/p>\n Gasp!<\/p>\n Egad!<\/p>\n Combine this with the Bank of Canada\u2019s rate coming down from a high of 5.00% to 2.75%, and I have to ask again:<\/p>\n \u201cIs the mortgage renewal cliff fact or fiction in 2025?\u201d<\/p>\n<\/blockquote>\n So then what\u2019s all the fuss about?<\/p>\n Searching Google for \u201cmortgage renewal cliff\u201d or \u201cmortgage renewal crisis\u201d results in very few articles in 2025.<\/p>\n Searching \u201cmortgage renewal shock\u201d nets us more and it also tells us that we\u2019re no longer in a \u201ccrisis\u201d nor are we about to fall off a \u201ccliff.\u201d<\/p>\n Take this one with a grain of salt because it\u2019s written by an online mortgage news site, but it doesn\u2019t s<\/p>\n \u201cMortgage Renewal Crisis Fading And Presenting Opportunity For Borrowers & Brokers\u201d<\/a> From the article:<\/p>\n It\u2019s long been flagged as one of the most prominent coming trends in Canada\u2019s mortgage market \u2013 and the wave of mortgage renewals slated for 2025 and 2026 is about to begin, with scores of borrowers refinancing at higher rates than they originally took out.<\/p>\n That burst of renewals was first viewed as a big looming challenge for the national financial system: in May last year, Canada\u2019s banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), said many homeowners were liable to face \u201cpayment shock\u201d with 76% of mortgages outstanding as of February 2024 up for renewal by the end of 2026.<\/p>\n But a flurry of interest rate cuts throughout last year by the Bank of Canada, and a slide in fixed rates, saw the threat posed by\u00a0the so-called \u201cmortgage cliff\u201d<\/a>\u00a0fade, with the potential jump in payments now expected to be significantly more manageable for most homeowners.<\/p>\n<\/blockquote>\n There\u2019s that word again:\u00a0manageable<\/em>.<\/p>\n And there\u2019s a new term that\u2019s replacing \u201ccrisis\u201d and \u201ccliff.\u201d\u00a0 Something called the \u201cmortgage renewal\u00a0wave<\/em>.\u201d<\/p>\n Instead of the media discussing the oncoming armageddon, some news sources are simply referring to the fact that a \u201cwave\u201d of borrowers will be renewing.<\/p>\n If you choose to see the positive aspect of this, it could mean that\u00a0competition<\/em> for an uncanny number of renewing borrowers could result in better terms and services.<\/p>\n Again, from an online mortgage source:<\/p>\n\n
![\"\"](\"https:\/\/torontorealtyblog.com\/wp-content\/uploads\/2025\/03\/2025.3.27-01.jpg\")
<\/p>\n\n
![\"\"](\"https:\/\/torontorealtyblog.com\/wp-content\/uploads\/2025\/03\/2025.3.27-02-1.jpg\")
<\/p>\n
Financial Post
May 31, 2023<\/p>\n
The Globe & Mail
November 2nd, 2023<\/p>\n\n
Financial Post
November 14, 2023<\/p>\n\n
\n
CBC
June 6, 2024<\/p>\n\n
The Globe & Mail
October 4, 2024<\/p>\n\n
Financial Post
November 29, 2024<\/p>\n\n
\n
![\"\"](\"https:\/\/torontorealtyblog.com\/wp-content\/uploads\/2025\/03\/2025.3.27-03.jpg\")
<\/p>\n\n
Canadian Mortgage Professional
January 15, 2025<\/p>\n\n
![\"\"](\"https:\/\/torontorealtyblog.com\/wp-content\/uploads\/2025\/03\/2025.3.27-04.jpg\")
<\/p>\n