The national divide is sharpening as the mortgage renewal wave squeezes the most vulnerable
The mortgage renewal wave hasn’t spiralled into a crisis yet in Canada, falling well short of the “cliff” some feared – but it’s still proving a huge challenge for low-income Canadians and exposing a widening divide between more financially secure borrowers and those who are rapidly running out of room.
That wave is “dissipating”, according to a recent analysis by Canada Mortgage and Housing Corporation (CMHC), but putting huge strain on some borrowers even as others absorb the impact of higher payments and rates.
And Carl De Souza (pictured top), senior vice president and sector lead for North American financial institution ratings at Morningstar DBRS in Toronto, told Canadian Mortgage Professional that a sharp divide had emerged in homeowners’ ability to handle that jump.
“You’ve got a proportion of the population that’s well cushioned. They’re the top tier. And then you’ve got the pockets that are getting very, very pressured,” he said.
Those contrasting fortunes are exposing an income gap in Canada that’s not new, but growing wider by the day.
Why Canada’s income gap is growing for mortgage holders
Statistics Canada revealed in April that income disparity – the difference in the share of disposable income between the top and bottom 40% of Canadians – grew in 2025, hitting 46.7 percentage points by the end of last year.
The divergence between financially secure households and those under strain has typically been more pronounced in the United States, De Souza said, but is now becoming clear on this side of the border too.
“That’s been a thing that’s always been prevalent in the US… but that income gap is widening in Canada,” he said.
Lower-income borrowers in sectors hit hardest by the US’s tariff regime since last year have been especially vulnerable to financial strain from mortgage renewals.
Losing a job is often a nightmare scenario for those borrower types when faced with steeper mortgage payments and a higher rate – and increasingly few ways of making those ends meet.
As Equifax data recently showed, those consumers often prioritize their mortgages and cut back on spending elsewhere to keep their house. But that can prove easier said than done.
“Those pockets of stressed borrowers don’t have a lot of capacity for anything – whether that’s higher inflation levels where they’re paying more for gas and food, or God forbid they have a car repair or a house repair,” De Souza said. “They just don’t have a lot of disposable income left.”
How mortgage renewals are squeezing lower-income Canadians
A slight silver lining for those borrowers, although it may not offer much solace: the renewal outlook is significantly better than it seemed two or three years ago, when interest rates were much higher and the Bank of Canada hadn’t cut rates yet.
In 2022 and 2023, the central bank embarked on a series of benchmark rate hikes towards a 22-year high of 5.0%, an effort to curb rampant inflation and bring price pressures back in line.
That lifted the Bank’s trendsetting interest rate 475 points higher than its level through much of 2020 and 2021, when scores of borrowers took out mortgages at rock-bottom rates.
If the Bank had kept that rate where it was and made no changes before 2025 or 2026, the effect on impacted borrowers would likely have been even worse than it is now. “I wouldn’t want to think about the consumers renewing this wave of mortgages in ’25, ’26, and into ’27 at a 5% overnight rate,” De Souza said.
Instead, the Bank brought rates significantly lower by the end of last year, trimming by 275 basis points to its current mark of 2.25%.
That means mortgage pain has proven milder than it might have been – but it’s not to say lower-income Canadians aren’t struggling.
While the least wealthy Canadians grew their net worth in 2025’s first quarter compared to a year before, rising mortgage costs offset that improvement.
“Although the least wealthy bought homes in the first quarter of 2025, due to declining average real estate values, the mortgage cost related to those purchases ($+5,233) outweighed the increase in the average value of their real estate holdings ($3,894),” StatCan said.
And a higher mortgage payment can ripple across a borrower’s entire financial picture, De Souza said. “With a lot of the borrowers that are still experiencing those payment shocks, there’s much less leeway for certain pockets of borrowers because [more of] that disposable income is being eaten up by your mortgage,” he said.
“There’s less for credit cards. There’s less for auto loans. There’s less for your unsecured lines of credit. There’s less for big car repairs and big housing repairs.”
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