Bank of Canada Warns: One in Ten Borrowers Could Struggle to Refinance by 2027
By Mehboob Ali Shaikh
The Bank of Canada has warned that by 2027, nearly 10 percent of mortgage holders in the Greater Toronto Area (GTA) could face difficulties refinancing their home loans. Mortgages obtained during the pandemic at historically low interest rates are now coming up for renewal at significantly higher rates, leading to increased monthly payments for many homeowners.
Experts say that while most borrowers will likely be able to renew their mortgages with their existing lenders, lower household incomes, unemployment, and declining home values could place growing financial pressure on some families.
According to the Bank of Canada’s latest Financial Stability Report, a major wave of mortgage renewals is approaching, potentially creating financial stress for thousands of Canadian households. The report estimates that by 2027, approximately 9 to 10 percent of borrowers in the Greater Toronto Area may be unable to refinance their mortgages or secure better lending terms.
During the COVID-19 pandemic, millions of Canadians locked in five-year mortgages at exceptionally low interest rates. Those mortgages are now reaching their renewal dates, and current borrowing rates remain considerably higher than the rates available when the loans were first issued. As a result, many homeowners are facing significantly higher monthly mortgage payments.
The central bank noted that while most borrowers managed to absorb rising payments during 2025 and 2026, signs of financial strain are becoming increasingly evident.
Recent Homebuyers Face the Greatest Risk
The report highlights that the greatest vulnerability exists among homeowners who purchased properties in 2022 and 2023, when housing prices reached historic highs.
During that period, many buyers in Toronto took on large mortgages relative to their incomes in order to enter the housing market.
By March 2026, the proportion of these borrowers who were more than 60 days behind on their mortgage payments had risen to 1.33 percent, compared with 0.78 percent a year earlier. This is substantially higher than the average delinquency rate of approximately 0.1 percent recorded in 2018 and 2019.
Falling Home Values Create Additional Challenges
According to the Bank of Canada, one of the biggest obstacles facing homeowners is the decline in property values compared with previous market peaks.
As home values fall, homeowners lose equity in their properties, making it more difficult to qualify for new loans or refinance existing mortgages.
The Bank estimates that, at current housing prices, approximately 4 percent of borrowers nationwide may be unable to refinance by 2027. In the Greater Toronto Area, that figure could reach nearly 9 percent.
The report also outlines a more concerning scenario. If home prices decline by an additional 10 percent, the national refinancing failure rate could rise to 7 percent, while the rate in the Toronto region could climb to as high as 12 percent.
Impact on Families and the Housing Market
Experts warn that such developments could create challenges not only for individual homeowners but also for the broader housing market and economy.
Mortgage brokers across the GTA say this is not merely a theoretical concern but an issue they are increasingly encountering in their day-to-day work.
Some borrowers, they note, risk entering what can become a “financial death spiral,” where they are unable to secure lower interest rates and also cannot access additional equity from their homes to ease financial pressures.
However, mortgage specialists emphasize that failing to refinance does not necessarily mean losing a home.
In many cases, borrowers who renew their mortgages with their existing financial institution—and do not request additional borrowing—may not be required to undergo a new income verification process or requalify under current lending rules.
Rising Costs Add Pressure
The report warns that if unemployment rises or households experience unexpected financial setbacks, heavily indebted families may struggle to keep up with mortgage payments and other financial obligations.
At the same time, higher costs for food, fuel, and everyday necessities continue to place additional pressure on middle-income households.
Advice for Homeowners
Mortgage experts recommend that homeowners:
- Review their financial situation well before their mortgage renewal date.
- Consult an experienced mortgage broker for professional guidance.
- Contact their lender immediately if they anticipate payment difficulties.
- Seek solutions early rather than delaying or hiding financial problems.
- Reduce unnecessary expenses and build an emergency savings fund.
As Canada enters a period of higher borrowing costs and slower housing market growth, financial experts say preparation and proactive planning will be essential for homeowners seeking to navigate the challenges of mortgage renewal in the years ahead.
