Mortgage renewals will strain Canadians, but most will manage: TD report

New single family houses billed as estate cottages and townhouses under construction are seen in an aerial view, in Delta, B.C., on Monday, Aug. 12, 2024. THE CANADIAN PRESS/Darryl Dyck

TORONTO — A report by TD Bank suggests mortgage renewals are expected to strain Canadian households, but most borrowers will manage albeit with less financial flexibility.

The report by economist Maria Solovieva says households who locked in their mortgage for five years in 2020 during the pandemic when interest rates were low are now renewing at much higher rates and will see higher payments.

But she says those who took out short-term mortgages last year when rates were high are renewing at much lower rates this year and can expect a drop in payments. 

That means in aggregate, mortgage payments in Canada are actually trending lower, Solovieva writes. 

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“In the final two quarters of last year, mortgage interest payments declined by an average of 1.7 per cent, providing enough relief to push total mortgage payments into contraction,” the report said. 

The downward trajectory of aggregate mortgage payments is expected to continue throughout the year, but Solovieva highlighted that some interruptions are expected during the fourth quarter of this year and the first quarter of 2026. 

So long as rates continue to decline though, especially at the long end, national mortgage payments should remain manageable, the report said.

“Our forecast for the mortgage service ratio – a measure of how much income goes toward payments – maintains improvement through year-end, before hitting a plateau that will remain higher than before the pandemic,” Solovieva said. 

But she notes the picture for non-mortgage borrowers is more concerning, with delinquency rates in this segment climbing. This category of borrowing includes credit cards, lines of credit and personal loans. 

“While non-mortgage debt makes up only about 25 per cent of the total household debt outstanding, it accounts for roughly 45 per cent of total debt payments. These credit facilities typically come with tighter lending conditions – shorter terms, higher interest rates, or both – which lead to higher monthly payments,” the report said. 

Households with greater reliance on this type of debt frequently have less financial flexibility and are vulnerable to rising payments.

“As a result, delinquency rates in this segment are already climbing more quickly,” Solovieva said. 

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This report by The Canadian Press was first published July 9, 2025.