Your Mortgage Is Up for Renewal and the Rate Is Higher. Here's What to Do.

Let's not sugarcoat it. If you locked in a five-year fixed mortgage in 2020 or 2021 at somewhere around 1.5% to 2%, renewing in 2026 is going to hurt.

Today's five-year fixed rates are sitting in the 3.84–4.04% range through an independent broker — and higher at the big banks. That gap translates directly into hundreds of dollars more every month, and nobody's renewal letter is going to warn you about all the options you actually have.

That's what this is for.

How bad is the payment shock, really?

Bad enough that over 1.5 million Canadian households have already renewed at a higher rate in 2025, with another million-plus expected to go through it in 2026.

Here's what the numbers look like in practice. A borrower who locked in at 1.9% in 2021 on a $500,000 balance is renewing into a world where the same mortgage costs roughly $400–$622 more per month. Annually, that's somewhere between $5,000 and $7,400 out of your household budget that wasn't there before.

On a $400,000 balance moving from 2.04% to 4.5%, you're looking at nearly $600 more a month — $7,200 a year.

These aren't edge cases. This is the average Canadian renewal experience in 2026.

The first thing most people get wrong: they sign the renewal letter

Your lender mails you a renewal offer 3–5 months before your maturity date. It looks official. It has a few term options, a rate, and a "sign here" line that implies you should take care of this quickly.

Don't sign it yet.

That renewal letter is an opening offer. It's almost never your lender's best rate. It's designed to capture the percentage of borrowers who assume switching is complicated, or that their bank will take care of them.

The reality: switching lenders at renewal typically costs nothing. No penalty, no legal fees in most cases. And the rate difference between your bank's renewal offer and what an independent broker can find you is often 0.15–0.30%. On a $500,000 mortgage over five years, that's $4,000–$7,500 back in your pocket.

Read the letter. Compare it. Then decide.

You have more options than you think

1. Lock in a rate hold 120 days out

Federal mortgage regulations give you the right to lock in a rate up to 120 days before your maturity date without any penalty. This is your most important move if you're renewing in the next few months. Rates have been drifting higher since early 2026 — a rate hold costs nothing and protects you while you shop.

Don't wait until 30 days before your renewal date. By then your negotiating leverage is gone and your lender knows it.

2. Switch lenders without re-qualifying

This one surprises a lot of people. If your mortgage is CMHC-insured and you're switching lenders at renewal without changing the original mortgage amount or amortization, you're generally exempt from re-qualifying under the stress test. You don't have to prove you can afford the new rate at plus 2%.

That exemption gives insured mortgage holders meaningful flexibility to shop the market without the stress test being a barrier.

3. Extend your amortization to lower the payment

If the payment increase is genuinely unmanageable, extending your amortization at renewal can reduce the monthly hit. Going from a 20-year remaining amortization to 25 years brings the payment down — you'll pay more interest over time, but you keep your cash flow intact in the short term.

One important catch: for insured mortgages, you generally can't re-extend beyond 25 years (or 30 years for qualifying first-time buyers) without fully re-qualifying and potentially triggering a new insurance premium. Talk to a broker before going this route.

4. Make a lump-sum prepayment before renewal

Most mortgages allow annual prepayments of 10–20% of the original principal without penalty. If you have savings sitting in a low-yield account, putting a lump sum against your mortgage before renewal reduces the balance you're renewing at — and shrinks the payment increase at the same time.

Check your current mortgage agreement for the prepayment privileges. Use them before your term ends, not after.

5. Consolidate high-interest debt into the renewal

Renewal is one of the few times you can restructure your mortgage without breaking it. If you're carrying credit card debt at 19–22%, rolling it into your mortgage at 4% dramatically reduces your total monthly debt load — even if the mortgage payment itself goes up.

This isn't the right move for everyone. Turning unsecured debt into mortgage debt means it's now tied to your home. But for households juggling high-interest balances alongside a payment increase, it's worth running the numbers.

Fixed or variable at renewal — a quick framework

This is a whole separate conversation, but here's the short version for renewal specifically.

Fixedmakes more sense if your budget is tight and you can't absorb a payment increase mid-term. Locking in gives you certainty for the full term regardless of what the Bank of Canada does. The tradeoff is a higher rate today and a steeper penalty if you need to break early.

Variableis currently running about 0.50–0.70% cheaper than fixed. If the Bank of Canada holds or cuts, you save money. If it hikes — and Scotiabank and Desjardins are both flagging possible hikes in the second half of 2026 — your payment goes up. The variable penalty (three months' interest) is far lower than the fixed IRD penalty if you need to exit early.

3-year fixedis the middle-ground a lot of renewal borrowers are landing on in 2026. You get payment certainty now without locking into five years of uncertainty. You'll renew again in 2029, when the rate picture may look meaningfully different.

What the rate outlook means for renewal timing

The Bank of Canada has held at 2.25% three times in a row and most major bank economists expect that to continue through the rest of 2026. But fixed rates are priced off bond yields, not the overnight rate — and bond yields have been climbing since early 2026 due to Middle East tensions and trade uncertainty heading into the CUSMA review in June.

Translation: waiting to renew in hopes that rates drop isn't a reliable strategy right now. The consensus isn't pointing toward meaningful cuts this year. A rate hold today protects you. Waiting a few months to see what happens might cost you.

A realistic timeline if you're renewing in 2026

6 months out:Start paying attention. Pull your current mortgage statement and note your maturity date, remaining balance, and any prepayment privileges.

4–5 months out:Open a rate hold with your current lender or through a broker. Start comparing renewal offers. This is when you have the most leverage.

3 months out:Make any lump-sum prepayments if you've decided to go that route. Get your broker or bank to model out fixed vs. variable scenarios at your actual renewal balance.

6 weeks out:Make your final decision. If you're switching lenders, your broker handles the paperwork — it's less work than you think.

Renewal date:Sign the new term. Don't let your mortgage go month-to-month while you deliberate — your lender will charge you whatever rate they feel like until you renew.

The one thing your renewal letter won't tell you

Your lender is counting on inertia. Most borrowers — especially those who've had the same bank for years — assume their loyalty will be rewarded with a fair rate. It usually isn't.

A 2026 Equifax report found that over 28% of Canadian homeowners are now switching lenders at renewal, up nearly 46% from the year before. That jump isn't because switching suddenly got easier — it's because more people figured out they were leaving money on the table by staying.

Your renewal is one of the few moments in your mortgage where you hold the leverage. You're a known borrower with a payment history. Any lender wants that. Use it.

Key terms for renewal

Maturity date— The date your current mortgage term ends and your rate expires. Not the same as your amortization end date.

Rate hold— A lender's commitment to honour a specific rate for up to 120 days while you finalize your renewal or purchase.

Interest Rate Differential (IRD)— The penalty for breaking a fixed mortgage before maturity. Not relevant at renewal, but relevant if you consider refinancing early.

Amortization— The total life of your mortgage. Your term is the chunk you're currently in (e.g., 5 years). Amortization is the full repayment period (e.g., 25 years).

Lump-sum prepayment— A one-time payment directly against your principal, separate from your regular payments. Allowed annually up to a set percentage under most mortgages.

Stress test— The federal qualifying rule requiring you to prove you can afford payments at your contract rate plus 2%. Generally not re-triggered when switching lenders at renewal on an insured mortgage.

Published May 2026. Rate figures are indicative as of publication and change daily. Confirm current rates and renewal options with a licensed mortgage broker before making any decisions. Rules may vary by province.