Falling equity, growing debt and income changes are narrowing refinancing options at renewal
Many homeowners approaching mortgage renewal expect it to give them room to consolidate debt, extend amortization, or lower monthly costs. A new Bank of Canada (BoC) warning suggests that for a growing share of borrowers, especially in the Greater Toronto Area, the numbers will not co-operate.
The BoC's latest Financial Stability Report estimates that about 9% of borrowers in the GTA would be unable to refinance at renewal in 2027 at current home prices.
Nationally, that figure sits at roughly 4%. If home prices were to fall a further 10%, the central bank projects the GTA share would rise to 12% and the national share to 7%.
When renewal doesn't deliver the flexibility borrowers expected
Leah Zlatkin, licensed mortgage broker and LowestRates.ca expert, says the BoC findings reflect a pattern she encounters regularly in practice.
Many homeowners who purchased when values were higher, or who have taken on more consumer debt since buying, find their refinancing options far narrower than anticipated when renewal arrives.
Read more: Monthly Spotlight: Mortgage Renewals
"More homeowners are coming to renewal expecting to refinance but the numbers don't always support that," says Zlatkin.
"If their equity is lower than expected, their debt has grown or their income has changed, the options available can look very different than what they had planned."
The BoC's data adds weight to that observation. Mortgage arrears of 60 days or more among Toronto-area borrowers with a high loan-to-income ratio reached 1.33% in March 2026, up from 0.78% a year earlier. That's well above the 2018–2019 average of 0.1%, according to the Bank.
GTA home prices are roughly 20% below their March 2022 peak, eroding the equity buffers many homeowners had counted on.
Even as analysis of why mortgage renewals in 2026 may not reach crisis levels applies broadly to most Canadian borrowers, the BoC data reveals stress concentrations among those carrying heavier debt loads or holding properties in markets that have softened.
Five factors brokers should flag early
Zlatkin identifies five reasons refinancing becomes harder than borrowers expect.
First, equity is not always as strong as anticipated. A drop in home value, combined with loan-to-value limits, can reduce available equity even for homeowners who have made consistent payments.
Second, consumer debt accumulated after purchase, such as credit card balances, narrows borrowing capacity by the time renewal arrives.
Third, income changes — parental leave, a move to self-employment, reduced hours, or retirement — can affect whether a borrower qualifies at all.
Read more: Here's how homeowners are coping with mortgage renewals in a choppy economy
Fourth, switching lenders is not automatic: homeowners who need to increase their mortgage amount or change their amortization must still meet current lender qualification requirements.
Fifth, planning too late is itself a risk because income, debt levels, and home values can all shift well before renewal, understanding borrowing limits early is critical.
"Renewal can feel like the point when borrowers get to reassess everything," says Zlatkin, "but refinancing is still based on what they qualify for at that moment. The earlier homeowners understand where they stand, the more time they have to plan around any limits before renewal arrives."
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