Approximately 60% of outstanding mortgages will renew by the end of next year, most of them at higher rates, according to a new report from the Bank of Canada.
The central bank issued a paper based on new and improved data from the Office of the Superintendent of Financial Institutions (OSFI), which features loan-level data on the stock of residential mortgage loans and home equity lines of credit (HELOCs) for the federally regulated lenders under OSFI’s oversight (representing about 80% of the total Canadian mortgage market, worth around $1.7 trillion).
Among other things, the new data — which the Bank of Canada uses to monitor financial stability risks and economic trends — reveals that 60% of existing mortgages are scheduled to be renewed by the end of 2026, and it estimates that about 60% of these loans (40% of all outstanding mortgages) will face higher interest rates when they are renewed.
“The largest share of mortgage holders renewing in 2025 and 2026 hold five-year fixed-rate mortgages. These borrowers initially took out their loans when interest rates were near their trough, and some will be facing a large payment shock,” the bank noted.
Borrowers with shorter, fixed-rate mortgages are at less risk of large shocks, it noted, as “Most of these mortgages were taken out in 2023 and 2024 when mortgage interest rates were elevated.”
The data also reveals that, as of September 2024, roughly 12% of variable-rate mortgages with fixed payments, were in negative amortization territory — this situation occurs when a borrower’s payments aren’t adequate to cover a mortgage’s interest, resulting in borrowers facing growing loan principal.
Previously, the Bank of Canada had to estimate the share of mortgages in negative amortization, but the new data allows the central bank to more accurately identify these kinds of loans (which represent about 2% of all outstanding mortgages).
The paper also noted that a large share of outstanding mortgages were originated in the past few years — about 70% of these loans were originated since 2019, and this rises to 80% when 2017 and 2018 are included.
And, it reported that the median outstanding principal balance for outstanding mortgages was $245,000, as of September 2024.
For mortgages written in the first nine months of 2024, the median principal was $344,000, it noted — which partly reflects borrowers with older loans having paid down some of their principal, but reflects higher home prices too, it said.
Indeed, the data showed that the median appraised value of homes involved in mortgages that were originated in 2024 was $600,000, compared with $485,000 for mortgages overall.