The wave of mortgage renewals that has long loomed over pandemic buyers who bought homes at rock-bottom interest rates may finally be coming to an end, according to a report Wednesday from Toronto-Dominion Bank.
“Canadian households are approaching the tipping point where the shock is behind them,” TD economist Maria Solovieva wrote in the report. “The hill was real but navigable, and income growth was the main climber.”
The most obvious indicator that Canadian households have weathered the worst of the mortgage payment surge is the share of their income spent on debt. The household debt service ratio fell from a peak of over 15 per cent in 2023 to about 14.6 per cent in the third quarter of 2025, according to the latest data from Statistics Canada.
Solid growth in personal disposable income over the past three years has helped homeowners manage higher monthly payments and turn the “mortgage ‘cliff’ into a much gentler ‘hill,'” Solovieva wrote. She previously told the Financial Post that Canadian households saw total disposable income growth of nearly eight per cent in 2024 and 4.7 per cent in 2025.
Many homeowners have also extended the amortization period of their mortgages to spread out their payments and reduce individual payments. The average mortgage payback period has been increasing since the beginning of 2021 and is now about 16 months longer than before the pandemic. Today it is about 25 years and five months, back then it was 24 years and one month, said Solovyeva.
Things are improving for homeowners with gradual downward pressure on all types of debt repayments thanks to the Bank of Canada’s lower interest rates. The key interest rate was last held stable at 2.25 percent in January, compared to the 22-year high of five percent between 2023 and 2024.
Currently, the split between variable and short-term fixed mortgages on the one hand and five-year fixed mortgages on the other is around 73 to 27 percent (compared to a split of 55 to 45 percent in early 2022), suggesting that the effects of recent interest rate cuts are being transmitted more quickly, the report said.
TD expects mortgage payments to increase slightly in early 2026, but payments to decline in the second half of this year as the share of mortgages renewing at lower interest rates becomes more dominant.
A July analysis report from the Bank of Canada suggested similar results: The central bank predicted the average monthly payment for those who renew in 2026 could be six per cent higher compared to December 2024 payments, but below the 10 per cent higher payments in 2025.
Mortgage interest cost inflation rose just 1.2 per cent year-over-year in January, compared to its peak of 31 per cent in August 2023, according to Statistics Canada’s latest consumer price index.
According to the TD report, mortgage interest cost inflation will most likely reverse by late 2026 or early 2027. The report noted that with interest rates stabilizing, this deflation is “unlikely to be dramatic.”
And while the debt service ratio is still expected to be slightly higher in the second half of 2026, this reflects new mortgages and higher average home prices, in contrast to higher payments from pandemic-era loans, Solovieva wrote.
This can help reduce overall cost pressures for consumers. “As the additional burden of increasing mortgage renewal payments is shifted away from consumers, the balance of risk for Canadian consumer spending is likely to shift in the second half of 2026.”
• Email: slouis@postmedia.com