Fixed Rates Rising as 2026 Renewal Shock Looms: Your Mortgage Minute (Dec 20, 2025)

As we close out 2025, the mortgage landscape is shifting in ways that will significantly impact homeowners heading into the new year. This week’s Mortgage Minute covers four critical developments: the looming renewal payment shock, a rare affordability win in Hamilton, Toronto’s new luxury property tax, and the continued climb in fixed mortgage rates.

The 2026 Renewal Reality: Payment Shock is Coming

Over half of all Canadian mortgages are scheduled to renew in 2026, and many homeowners are about to experience significant payment increases.

The Numbers:

If you locked in a mortgage during the pandemic at rates in the 1-2% range, you’re now looking at renewal rates around 4%. For many homeowners, this translates to a $500-$600 per month payment increase.

Let’s put that in perspective:
– A homeowner who secured a $500,000 mortgage in December 2020 at 1.39% was paying approximately $2,224/month
– Renewing that same mortgage today at 3.94% would mean a monthly payment of $2,800
– That’s a 26% increase, or $576 more per month

What This Means for You:

Banks will send you competitive renewal offers, and in many cases, they’re solid rates. However, don’t just auto-sign your renewal letter without exploring whether restructuring makes more sense for your situation.

Consider a Refinance If:
– You’ve accumulated high-interest debt since you purchased (credit cards, lines of credit, car loans)
– You need to access equity for renovations, investments, or other purposes
– You want to restructure your mortgage to better align with your current financial goals

A refinance allows you to roll high-interest debt into your mortgage at a much lower rate, or unlock equity that’s built up in your home. This can often result in better overall cash flow than simply renewing at your bank’s offered rate.

Source: Canadian Mortgage Professional, WOWA.ca

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Hamilton Sees Rare Affordability Improvement

While most Canadian housing markets remain challenging for buyers, Hamilton stands out as one of the few markets showing real affordability gains.

The Data:

According to Ratehub.ca’s latest affordability report, Hamilton experienced the most significant improvement among major Canadian cities in November:
– Average home prices dropped $12,500
– Qualifying income required decreased by $2,780
– Monthly mortgage payments reduced by $76, saving buyers $912 annually

Why This Matters:

For buyers who have been priced out of the Toronto market, Hamilton represents a legitimate alternative. The numbers are moving in the right direction, and with inventory remaining elevated across Ontario, buyers in the $600,000-$800,000 range have negotiating power.

Hamilton was one of only 12 out of 13 major cities studied that saw affordability improve month-over-month.

Source: Ratehub.ca, Canadian Mortgage Professional

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Toronto Luxury Property Tax: April 2026 Deadline

Toronto City Council approved a graduated increase to the Municipal Land Transfer Tax (MLTT) for luxury properties, effective April 2026.

What Changed:

The new graduated scale affects homes selling for more than $3 million:
– $3M-$4M: 4.40% total MLTT (0.9% increase)
– $4M-$5M: 5.45% total MLTT (0.95% increase)
– $5M-$10M: 6.5% total MLTT (1% increase)
– $10M-$20M: 7.55% total MLTT (1.05% increase)
– Over $20M: 8.6% total MLTT (1.10% increase)

Action Item:

If you’re purchasing a property in Toronto valued over $3 million, closing before April 2026 will save you thousands in land transfer tax. The increase targets the wealthiest 2% of homebuyers and is expected to generate $13.8 million in additional revenue for the city in 2026.

Source: CBC News, Toronto City Council

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Fixed Rates Continue to Climb

Despite the Bank of Canada holding its policy rate steady at 2.25% last week, fixed mortgage rates have continued to tick higher throughout December.

Why Rates Are Rising:

Fixed mortgage rates are tied to bond yields, not the Bank of Canada’s overnight rate. Strong economic data—including GDP growth of 2.6% in Q3 and unemployment dropping to 6.5%—has pushed government bond yields higher, forcing lenders to adjust their fixed-rate pricing accordingly.

What This Means:

The window for “bottom-of-the-market” fixed rates appears to be closing. Borrowers who were waiting for rates to drop further are now watching them move in the opposite direction.

If you’re planning to lock in a fixed rate for a purchase or refinance, waiting may not be in your best interest.

Source: Bank of Canada, Canadian Mortgage Professional, Statistics Canada

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Bottom Line

As we head into 2026, three key themes are emerging:

1. Renewal shock is real – If you’re renewing, explore whether a refinance makes more sense than a straight renewal
2. Regional opportunities exist – Hamilton’s affordability improvement shows that not all markets are frozen
3. Fixed rates are rising – The brief window of sub-4% rates is closing

If you’re buying, renewing, or refinancing in 2026, don’t make decisions in a vacuum. The mortgage landscape is shifting, and having a strategic conversation now can save you thousands over the term of your mortgage.