If you locked in a mortgage between 2020 and 2022, your renewal is approaching — and the rate environment you're walking into looks nothing like the one you left. Roughly 1.2 million Canadian mortgages are up for renewal in 2026, and most borrowers are facing rates 2 to 3 percentage points higher than what they're currently paying.
This isn't a reason to panic. But it is a reason to prepare. This guide walks you through the math, the decisions, and the strategies that can save you thousands at renewal time. Use our Mortgage Calculator to run your own numbers as you read.
🎯 Key Takeaway
- ~1.2 million Canadian mortgages renewing in 2026, most at significantly higher rates
- A $500K mortgage going from 1.89% to 4.5% means ~$700/month more in payments
- You are not obligated to renew with your current lender — shopping around can save 0.25-0.50%
- Start preparing 120 days before your renewal date for maximum leverage
- Lump-sum prepayments before renewal reduce the balance that gets repriced at the higher rate
The 2026 Renewal Wave
Between 2020 and early 2022, Canadians enjoyed some of the lowest mortgage rates in history. Five-year fixed rates dipped below 2%, and variable rates were available at prime minus 1% or more. It felt like free money — and for a while, it was.
The Bank of Canada's aggressive rate hikes from March 2022 through July 2023 changed everything. The overnight rate went from 0.25% to 5.00% in just 18 months. While the Bank has since begun cutting rates, the current policy rate of approximately 3.00% is still dramatically higher than the pandemic floor.
2021 average 5-year fixed rate: ~1.89%
Current 5-year fixed rate (Feb 2026): ~4.20–4.60%
Current 5-year variable rate: ~4.50–5.10%
Bank of Canada policy rate: ~3.00%
If you signed a 5-year fixed in early 2021, your renewal lands right around now. And even though rates have come down from their 2023 peak, they're still roughly double what you've been paying. That's what makes this renewal cycle different from any in recent memory.
Payment Shock: The Real Math
Let's run concrete numbers. These examples assume a 25-year amortization at origination and standard monthly payments.
Example 1: $400,000 Mortgage
Original terms (2021): $400,000 at 1.89%, 25-year amortization
- Monthly payment: $1,686
- After 5 years, remaining balance: ~$334,000
At renewal (2026): $334,000 at 4.40%, 20-year remaining
- New monthly payment: $2,088
- Increase: $402/month ($4,824/year)
Example 2: $600,000 Mortgage
Original terms (2021): $600,000 at 1.89%, 25-year amortization
- Monthly payment: $2,529
- After 5 years, remaining balance: ~$501,000
At renewal (2026): $501,000 at 4.40%, 20-year remaining
- New monthly payment: $3,132
- Increase: $603/month ($7,236/year)
Example 3: $800,000 Mortgage (GTA/GVA Reality)
Original terms (2021): $800,000 at 1.89%, 25-year amortization
- Monthly payment: $3,372
- After 5 years, remaining balance: ~$668,000
At renewal (2026): $668,000 at 4.40%, 20-year remaining
- New monthly payment: $4,176
- Increase: $804/month ($9,648/year)
Your mortgage payment is only part of the picture. Property taxes have risen 5-10% in many municipalities since 2021, and home insurance premiums have increased even more. Factor all housing costs when stress-testing your budget.
Fixed vs Variable in 2026
This is the question every renewing borrower is wrestling with. There's no universally right answer, but here's how to think about it:
The Case for Fixed (4.20–4.60%)
- Certainty: Your payment is locked for the full term. No surprises.
- Budget stability: If the payment shock is already stretching you, the last thing you need is more variability.
- Rate floor may be near: The Bank of Canada has signaled it's approaching the end of its cutting cycle. Fixed rates have already priced in expected cuts.
- Spread is tight: The gap between fixed and variable is smaller than usual, reducing the upside of going variable.
The Case for Variable (Prime – 0.50 to Prime – 1.00%)
- Historically cheaper: Over any 25-year period in Canadian history, variable rates have cost less than fixed rates roughly 80% of the time.
- More rate cuts possible: If the economy softens further, the Bank of Canada could cut more aggressively, lowering your rate.
- Flexibility: Variable mortgages typically have lower penalties if you need to break (3 months' interest vs. IRD).
- Risk tolerance: If your budget can handle a 1-2% rate swing, variable may save you money over the term.
Consider a 3-year fixed as a compromise. Rates on shorter terms are often lower, and you get to re-evaluate sooner if rates continue falling. A 3-year fixed in 2026 might be 3.90–4.20%, with renewal in 2029 when the rate picture could look very different.
Should You Switch Lenders at Renewal?
This is the single biggest opportunity most Canadians miss at renewal time. Your current lender will send you a renewal offer — often by mail, about 30 days before your maturity date. Do not just sign it and send it back.
Why Switching Saves Money
Your lender's initial renewal offer is almost never their best rate. They're counting on inertia — that you'll find switching too complicated and just accept what they give you. In reality:
- Switching lenders at renewal costs $0 in most cases (the new lender covers legal and appraisal fees)
- You do not need to re-qualify under the stress test if you switch to a federally regulated lender and your mortgage is in good standing
- Rate savings of 0.25–0.50% are common, which on a $500K mortgage saves $7,500–$15,000 over a 5-year term
How to Shop Your Renewal
- Start 120 days early. Most lenders will lock a rate for 90-120 days. Start shopping 4 months before your renewal date.
- Get quotes from at least 3 lenders. Include a Big 5 bank, a credit union, and a monoline lender (like MCAP, First National, or CMLS).
- Use a mortgage broker. Brokers have access to multiple lenders and can often get better rates than you'd get walking into a branch.
- Bring competing offers back to your current lender. Armed with real quotes, call your lender's retention team. They'll often match or come close.
On a $500,000 remaining balance, accepting a rate just 0.30% higher than what you could get elsewhere costs you approximately $9,000 over a 5-year term. That's real money for about 2 hours of shopping.
Understanding Mortgage Penalties
If you're considering breaking your current mortgage early (before renewal) to lock in today's rates, you need to understand the penalty math.
Two Types of Penalties
1. Three Months' Interest
This is the simpler calculation. If your remaining balance is $400,000 and your current rate is 1.89%:
- Three months' interest = $400,000 × 1.89% ÷ 12 × 3 = $1,890
2. Interest Rate Differential (IRD)
This is where it gets expensive. The IRD is the difference between your current rate and the lender's current posted rate for the time remaining on your term, applied to your balance. For Big 5 banks, this can be eye-wateringly large because they use their posted rate (which is inflated) rather than the discount rate you actually received.
A borrower with a $500,000 balance, 1.89% rate, and 2 years remaining could face an IRD penalty of $10,000–$20,000+ at a Big 5 bank. Monoline lenders typically use a fairer calculation method, resulting in significantly lower IRD penalties. If you're considering breaking early, do the math first.
Fixed vs Variable Penalties
- Variable rate mortgages: Almost always just 3 months' interest. This is one of the biggest advantages of variable.
- Fixed rate mortgages: The greater of 3 months' interest OR the IRD. Fixed penalties at Big 5 banks are notoriously expensive.
The Blend-and-Extend Option
Some lenders offer a "blend and extend" option, where they blend your current rate with the new rate for an extended term — without charging a penalty.
How It Works
If you have 2 years left at 1.89% and current 5-year rates are 4.40%:
- Blended rate ≈ (1.89% × 2 + 4.40% × 3) ÷ 5 = ~3.40% for a new 5-year term
- This locks in a below-market rate with no penalty
Blend-and-extend is particularly attractive if: (1) your current rate is very low, (2) you have significant time remaining on your term, and (3) the IRD penalty would be large. The catch? You can only blend-and-extend with your current lender, so you lose the ability to shop competitively. Run both scenarios on our Mortgage Calculator.
How to Prepare for Renewal
6+ Months Before Renewal
- Stress test yourself. Calculate what your payment would be at rates 1-2% higher than today's. Can your budget handle it? Use FiggyBank's Mortgage Calculator to model scenarios.
- Make lump-sum prepayments. Most mortgages allow 10-20% prepayment per year. Every dollar you pay down now is a dollar that doesn't get repriced at the higher rate. A $20,000 lump sum before renewal on a $500K mortgage saves you roughly $90/month.
- Build an emergency buffer. Aim for 3-6 months of the new (higher) payment in savings.
120 Days Before Renewal
- Start shopping rates. Get quotes from multiple lenders and brokers.
- Lock a rate hold. Most lenders will guarantee a rate for 90-120 days, protecting you if rates rise.
- Review your amortization. If your budget allows, keeping your original amortization schedule (rather than extending) saves significant interest long-term.
30 Days Before Renewal
- Compare your lender's offer to market rates. If they're not competitive, call and negotiate — or switch.
- Decide on term length. Don't default to 5-year fixed just because it's what you had before. Consider your life plans over the next 3-5 years.
- Review prepayment privileges. Some lenders offer better prepayment terms than others. If you plan to make extra payments, this matters.
If the higher payments are truly unaffordable, you can re-amortize back to 25 years at renewal. This lowers your payment but costs more in total interest. Think of it as a pressure valve, not a long-term strategy. Some lenders may even offer 30-year amortizations for renewals in 2026.
The Bottom Line
Yes, your mortgage payment is going up. For most 2021-vintage borrowers, the increase will be $300–$800/month depending on your balance and location. That's real money, and it's worth taking seriously.
But you have more control than you think:
- Don't just sign your lender's renewal offer. Shopping saves the average borrower $5,000–$15,000 over a term.
- Consider your term length carefully. A 3-year fixed or variable might suit you better than the default 5-year fixed.
- Use prepayments strategically to reduce the balance that gets repriced.
- Start early. The borrowers who get the best rates are the ones who start shopping 4 months out.
The pandemic-era rate party is over. But with preparation and smart shopping, you can navigate this renewal cycle without it derailing your finances.
🎯 Action Plan
- Today: Run your renewal math on FiggyBank's Mortgage Calculator
- 6 months out: Make lump-sum prepayments and build a payment buffer
- 120 days out: Get rate quotes from 3+ lenders and lock a rate hold
- 30 days out: Negotiate with your current lender or finalize your switch
- At renewal: Choose your term deliberately — don't default to 5-year fixed
🧮 Model your renewal scenarios — use our free Mortgage Calculator to compare rates and payment options.
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