The mortgage renewal wave that has long loomed over pandemic buyers who purchased homes at rock-bottom rates may finally be coming to an end, according to a Wednesday report from Toronto-Dominion Bank.

“Canadian households are approaching the turning point where the shock is behind them,” TD economist Maria Solovieva wrote in the report. “The hill was real but navigable, and income growth was the main mountaineer.”

The most obvious indicator that Canadian households have weathered the worst of the mortgage payment hikes is how much of their income is being spent on debt. The

household debt-service ratio

fell from 2023 highs of over 15 per cent to about 14.6 per cent in the third quarter of 2025, according to the latest Statistics Canada data.

Solid personal disposable income growth over the past three years has helped homeowners manage higher monthly payments, turning the “mortgage ‘cliff’ into a much gentler ‘hill,’” Solovieva wrote. She previously

told Financial Post

that Canadian households saw aggregate disposable income growth of nearly eight per cent in 2024 and 4.7 per cent in 2025.

Many homeowners have also been extending the amortization period on their mortgages to spread out their payments and reduce each instalment. The average mortgage amortization length has been rising since early 2021 and is now about 16 months longer than before the pandemic. It is about 25 years and five months now versus 24 years and one month then, Solovieva said.

Improving matters for homeowners is gradual downward pressure on all types of debt payments thanks to the

Bank of Canada

’s lower policy rates. The key rate was last held steady at 2.25 per cent in January, compared with the 22-year high of five per cent maintained between 2023 and 2024.

Currently, the split between

variable

and short-term

fixed mortgages

on the one hand and five-year fixed mortgages on the other is about 73 per cent to 27 per cent (compared with a 55-45 per cent split in early 2022), suggesting the impact of recent

interest rate

cuts will be transferred more quickly, the report said.

TD anticipates modest increases in mortgage payments to persist in early 2026, but payments to fall in the second half of this year as the share of mortgages renewing at lower rates become more dominant.

A Bank of Canada

analytical note

from July indicated similar outcomes: The central bank forecasted the average monthly payment could be six per cent higher for those renewing in 2026 compared with December 2024 payments, but down from 10 per cent higher payments in 2025.

Mortgage interest cost inflation in January inched up by only 1.2 per cent year over year, compared with its peak of 31 per cent in August 2023, according to

Statistics Canada’s latest consumer price index

.

Mortgage interest cost inflation is most likely to reverse by the end of 2026 or the beginning of 2027, according to the TD report, which noted this deflation is “unlikely to be dramatic” given stabilizing interest rates.

And although the debt service ratio is still expected to be modestly higher in the second half of 2026, this reflects new mortgages and higher average home prices, as opposed to higher payments from pandemic-era loans, Solovieva wrote.

This may help ease the overall cost squeeze for consumers. “As the added weight of mortgage renewal payment increases is taken off consumers backs, the balance of risks for Canadian consumer spending should shift in the second half of 2026.”

• Email: slouis@postmedia.com

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