A Strategic Roadmap for the 2026 Mortgage Renewal

Key Takeaways

• The 2.25% Anchor: The era of ultra-low rates has passed. The BoC’s 2.25% policy rate is the new baseline for financial planning.
• Quantify the Shock: Use a mortgage calculator today to determine exactly how much your monthly payment will increase. Knowledge is the first step toward a plan.
• Switching Power: You are no longer “trapped” with your current lender. Use a mortgage broker to explore “straight switch” options that avoid the stress test.
• Strategic Flexibility: Tools such as amortization extensions and debt-consolidation refinancing can help manage payment shock and protect your monthly cash flow.
• Execute with a Pro: Mortgage brokers have the expertise and lender access to turn a complex renewal into a strategic financial decision. Reach out to your broker at least 120 days before maturity.

For the past several years, the Canadian housing market has felt like a high-stakes waiting game. Homeowners and prospective buyers alike have been glued to the headlines, waiting for the “next big drop” in interest rates that would return us to the era of ultra-low borrowing costs.

However, as we enter 2026, the Bank of Canada (BoC) has signalled a profound policy shift. Governor Tiff Macklem has framed the current policy rate of 2.25% not as a temporary pause, but as a “steady level” appropriate for today’s economic conditions. The implication is clear: the days of expecting rates to tumble back to 1.5% or lower are likely over. We are now living in a “higher-for-longer” environment, and for the 1.15 million Canadians renewing their mortgages this year, passive waiting is no longer a viable strategy.

At Marathon Mortgage, we work closely with mortgage brokers to help Canadians navigate these transitions. While the market has shifted, the opportunities to secure your financial future have not disappeared — they simply require a more proactive, informed approach.

The Math of the “New Normal”: Quantifying the Impact

To understand why a strategic plan is necessary, we must look at the cold, hard numbers. Many homeowners renewing in 2026 originally purchased their homes in 2021, a year defined by sub-2% mortgage rates.

Consider a homeowner who bought a property for $685,000 in 2021. With a five-year fixed term ending in 2026, they are likely moving from an approximately 1.99% rate to a new renewal rate in the neighbourhood of 4.25%.

The math is sobering: that homeowner faces a monthly payment increase of roughly $718.

This is the “payment shock” that defines the 2026 renewal cycle. However, this number shouldn’t be a surprise that hits you on the day of renewal. The first step in our framework is to take the guesswork out of the equation. By using a mortgage calculator with your current balance, remaining amortization, and a realistic estimated renewal rate, you can turn a looming crisis into a manageable financial plan.

The Seven-Step Renewal Strategy: Converting Crisis into Control

Success in this environment requires a systematic approach. Working with your mortgage broker, you can follow this seven-step framework to protect your cash flow and align your mortgage with your long-term goals.

Step 1: Predict Your Payment and Assess Stability

You cannot plan for what you haven’t measured. Start by running the exact numbers. Your mortgage broker can provide you with current market projections to help you estimate your new rate.

Once you have your estimated new payment, perform a “Payment Tolerance Test.” Ask yourself: “Could my budget absorb an extra $300 or $500 a month today?” If the answer is no, prioritize payment certainty. If your budget is flexible, you may have more room to explore different product structures. This step helps you decide whether you need the absolute predictability of a fixed rate or the flexibility of an Adjustable-Rate Mortgage (ARM).

Step 2: Review Your Options — Fixed vs. Adjustable

In the Canadian market, the choice between fixed and adjustable rates is the most critical decision at renewal. Historically, adjustable rates have been a popular choice in stable or falling rate environments. However, the market has seen a dramatic shift. In 2021, adjustable and variable-rate products held nearly 58% of the market share; today, that has fallen to roughly 24%.

This shift is largely due to the “compressed spread”— the price difference between a fixed rate and an ARM has become much smaller. In the current environment, with the BoC steady at 2.25% and bond yields rising due to external economic pressures (such as US inflation and tariff uncertainties), fixed rates offer a high level of predictability.

Note: It is important to distinguish between an Adjustable-Rate Mortgage (ARM) and a Variable-Rate Mortgage. At Marathon Mortgage, we focus on Adjustables, where the payment fluctuates in direct response to changes in the Prime rate. This ensures your amortization remains on track, even if the rate moves.

Step 3: Diagnose Your Risk Tolerance

Risk tolerance is where your financial reality meets your psychological comfort. Even if your budget can handle a fluctuating payment, you might find the uncertainty stressful. Conversely, you might be willing to accept some movement in your payment if it means potentially benefiting from a future rate cut.

Your mortgage broker can help you weigh these factors. The goal is to choose a product that not only looks good on paper but also lets you sleep soundly at night.

Step 4: Explore Alternate Lenders (The Broker Advantage)

One of the most significant advantages for homeowners in 2026 is a recent regulatory change. In November 2024, OSFI removed the “stress test” for uninsured mortgage renewals. This means if you are doing a “straight switch”— moving your mortgage to a new lender without increasing the loan amount or amortization — you no longer have to qualify at the much higher stress test rate.

This change significantly increases your negotiating power. You are no longer “trapped” with your current bank’s renewal offer. However, many lenders have been slow to update their internal systems to follow these new rules. A mortgage broker knows exactly which lenders are currently honouring the “straight switch” rules and can help you avoid non-competitive “renewal-only” offers from your existing bank.

Step 5: Prepare a Post-Renewal Budget

Don’t wait for your first new payment to leave your bank account before looking at your spending. We recommend building your post-renewal budget at least 90 days before your mortgage matures.

This lead time allows you to identify areas where you can cut back or find ways to increase your income. If the budget simply doesn’t balance with the new payment, you still have time to discuss alternative structures — like an amortization adjustment — with your broker.

Step 6: Adjust Amortization to Reduce Payment Shock

If the monthly payment increase is too steep, extending your amortization is one of the most effective tools at your disposal.

For example, extending a remaining 20-year amortization back to 25 years can materially reduce your monthly obligation. In the scenario we discussed earlier, this could drop the monthly payment from $3,939 to $3,429 — a saving of $510 per month.

While this does mean you will pay more in total interest over the life of the mortgage, it preserves your immediate affordability and prevents a cash-flow crisis. You can always use lump-sum payments in the future to “catch up” on your amortization once interest rates fall or your income grows.

Step 7: Refinance Strategically

If you have at least 20% equity in your home (meaning your Loan-to-Value is 80% or less), a strategic refinance can be a powerful move. This isn’t about borrowing more for lifestyle spending; it’s about debt consolidation.

By rolling high-interest debt — like credit cards or car loans — into your mortgage, you can significantly lower your total monthly debt obligations. A refinance should always be used to strengthen your overall financial position and improve your long-term cash flow.

The 120-Day Rule: Why Early Execution Matters

In a volatile market, timing is your best friend. Most lenders allow you to “lock in” a rate up to 120 days before your mortgage matures. Some approvals are even available up to 10 months in advance.

Waiting until the final 30 days is a high-risk strategy. Appraisals, income verification, and legal reviews take time. By starting early, you protect yourself against sudden spikes in the bond market and ensure you have the luxury of choice rather than being forced into a last-minute decision.

Behind the Scenes: What Drives Your Rate?

It is a common misconception that the Bank of Canada is the only factor influencing mortgage rates. In reality, fixed rates are primarily driven by the bond market.

Even if the BoC stays paused at 2.25%, fixed rates can rise if government bond yields go up. Currently, factors like US inflation data and trade tariff uncertainties are pushing bond yields higher. This means that fixed rates could potentially rise even if the BoC doesn’t hike.

For those in an Adjustable-Rate Mortgage (ARM), the risk is different. Your rate is tied to the Prime rate, which is directly influenced by the BoC’s policy rate. As long as the BoC holds at 2.25%, your payment should remain relatively stable. The larger near-term risk for most renewers is the bond market’s impact on fixed rates.

Keeping Your Pulse on the Market: Key Economic Indicators to Watch in 2026

When preparing for a mortgage renewal, it can often feel like you are at the mercy of giant economic forces beyond your control. However, the Bank of Canada doesn’t make decisions in a vacuum. Their policy rate — the 2.25% “anchor” we’ve discussed — is a direct reaction to specific data points.

By understanding these signals, you and your mortgage broker can better predict whether rates are likely to hold steady, dip, or rise. As we move into 2026, these are the four primary “economic vital signs” you should monitor:

1. GDP Growth: The Economy’s Report Card

Gross Domestic Product (GDP) is essentially the measure of Canada’s economic health. It tracks the total value of everything we produce and sell.

• Why it matters: The Bank of Canada (BoC) aims for a “Goldilocks” economy — not too hot (which causes inflation), and not too cold (which leads to recession).
• The Signal: If GDP growth remains weak or slips into negative territory, it suggests the economy is struggling. To “grease the wheels” and encourage spending, the BoC may decide to lower the policy rate. Conversely, if GDP is unexpectedly strong, the BoC will be more likely to maintain the 2.25% pause to ensure the economy doesn’t overheat.

2. Employment Data: The Human Element

Every month, Statistics Canada releases a jobs report. While the overall unemployment rate is a popular headline, the BoC looks deeper into the quality of those jobs.

• Why it matters: Employment is the engine of the housing market. When people feel secure in their full-time jobs, they are more likely to buy homes and keep up with mortgage payments.
• The Signal: A decline in full-time employment is a significant red flag for the BoC. If the January 2026 jobs report shows a trend of job losses, it increases the probability that the central bank will cut rates to stimulate the economy. If the job market remains robust, however, the pressure to cut rates diminishes.

3. Inflation (The Consumer Price Index)

The Consumer Price Index (CPI) tracks the change in prices for a “basket” of goods and services, from groceries to gasoline. The BoC’s primary mandate is to keep inflation around the 2% target.

• Why it matters: Inflation is the main reason interest rates rose so sharply in previous years. The BoC uses high interest rates as a tool to cool down rising prices.
• The Signal: If CPI stays within the BoC’s target range (around 2%), they are likely to maintain their 2.25% “steady state” pause. However, if inflation begins to creep back up—perhaps due to global supply chain issues or trade tariffs—the BoC may be forced to keep rates higher for longer than anyone anticipated.

4. The BoC’s January 2026 Announcement: The Tone-Setter

The Bank of Canada meets eight times a year to announce its rate decision, and the first meeting in January is always the most influential. It sets the narrative for the months to follow.

• Why it matters: This announcement accompanies a “Monetary Policy Report” that outlines the BoC’s outlook for the year.
• The Signal: Current market predictions suggest the BoC will likely announce a “hold” in January, confirming that 2.25% is the new normal. While there is a small possibility of a single 0.25% cut later in 2026, it would likely only happen if the GDP or employment data mentioned above significantly deteriorate. This announcement will be the “green light” for many renewers to finalize their strategies.

How to Use This Information

You don’t need to be an economist to navigate your 2026 renewal. Your mortgage broker’s role is to act as your “market interpreter.” They monitor these indicators daily to determine how they affect products like the Adjustable-Rate Mortgage (ARM) or fixed-rate terms.

For example, if the January jobs report is weak, your broker might suggest an ARM, as a future rate cut would immediately lower your payment. If inflation remains “sticky” and bond yields are rising, they might advise locking in a fixed rate to protect you from further volatility.

Decision Rules: Your 2026 Renewal Playbook

When it comes to mortgages, “analysis paralysis” can be expensive. With the Bank of Canada holding steady at 2.25%, the strategy for 2026 isn’t about outsmarting the market — it’s about out-planning it. Depending on when your mortgage “matures” (the official end of your term), your playbook will look a little different.

If You are Renewing in Q1 2026 (January – March)

For those with renewals in the first few months of the year, the time for “wait and see” has passed. You are currently in the “execution zone.”

• Avoid the “February Cut” Trap: Many homeowners are tempted to wait for the next Bank of Canada announcement in early February, hoping for a 0.25% cut. However, as we’ve discussed, fixed rates are driven by the bond market. If bond yields rise due to global economic factors, fixed mortgage rates could climb by 0.40% or more, completely wiping out any benefit from a small BoC cut.
• The “Acceptability” Rule: If you and your mortgage broker identify a rate today that your budget can absorb, lock it in. Secure a rate hold immediately. This provides a “ceiling” for your expenses. If rates happen to drop significantly before your actual renewal date, your broker can often negotiate the lower rate for you—but if rates rise, you are protected.
• Focus on the Switch: Since you are within the 120-day window, have your broker initiate the “straight switch” paperwork now. This ensures you aren’t rushing through legal and appraisal steps at the last minute, which could force you into a high-rate “open” mortgage for a month while the paperwork catches up.

If You are Renewing in Mid-to-Late 2026

If your renewal is still six to ten months away, you have the luxury of time, but that time should be used for strategic preparation, not procrastination.

• Run the “What-If” Scenarios: Your strategy should be finalized now. Sit down with your mortgage broker to run four specific simulations:
  1. The Status Quo: What does a 5-year fixed rate look like for your budget?
  2. The ARM Option: Would an Adjustable-Rate Mortgage (ARM) provide a lower entry rate, and can your budget handle potential payment fluctuations?
  3. The Amortization Safety Valve: How much would extending your amortization to 25 or 30 years reduce your monthly “payment shock”?
  4. The Refinance Consolidation: If you have high-interest debt elsewhere, would a strategic refinance at renewal strengthen your overall financial health?
• Monitor, Don’t Obsess: You don’t need to watch the daily bond yields—that’s your broker’s job. Instead, monitor your own “post-renewal budget.” Start setting aside the difference between your current payment and your projected 2026 payment into a high-interest savings account. This acts as a “stress test” for your lifestyle and builds a cash cushion that you can use for a lump-sum payment at renewal.
• The 10-Month Early Approval: Some lenders offer rate locks or “pre-approvals” for renewals up to 10 months out. Ask your broker if a “long-term hold” is available. It might come with a slightly higher rate than a 120-day hold, but for those who value absolute peace of mind, it’s a strategy worth considering.

The Universal Rule: Don’t Default to “Easy”

The easiest thing to do is to sign the renewal form that your current bank sends you in the mail. It takes 30 seconds, and it requires no paperwork. It is also statistically one of the most expensive signatures you will ever provide.

Banks often offer “posted rates” or less-than-competitive offers to their existing clients, assuming they won’t want the “hassle” of switching. With the removal of the OSFI stress test for renewals, that hassle has essentially disappeared. Your mortgage broker can handle the heavy lifting of a switch, ensuring that your loyalty to your bank doesn’t cost you thousands of dollars in unnecessary interest.

Your Mortgage Broker is Your Most Valuable Asset

The 2026 renewal cycle represents a significant shift in the Canadian housing market, but it is not a hurdle you have to clear alone. At Marathon Mortgage, the best outcomes are achieved when a mortgage broker’s expertise and objectivity support homeowners.

Because Marathon Mortgage works closely through the broker channel, your broker is your gateway to our products and our “higher-for-longer” strategies. They have the tools to navigate the new OSFI rules, the knowledge to monitor the bond market, and the dedication to find a solution tailored specifically to your family’s needs.

Don’t let your renewal notice be the start of the conversation — let it be the conclusion of a well-executed plan. Contact your mortgage broker today to start building your 2026 roadmap.