The trend of cheap mortgages renewing into higher rates is starting to reverse, TD’s report says.PATRICK DOYLE/The Canadian Press
For years, analysts have been warning of a mortgage-renewal cliff as loans during the height of the pandemic expired and homeowners renewed at higher interest rates.
This week, a report from TD economist Maria Solovieva said Canadians have managed to make it through this fraught renewal period just fine.
“According to TD’s internal data, Canadian households are approaching the turning point where the shock is behind them,” Ms. Solovieva wrote in her report.
Ms. Solovieva said Canadians have managed to wade through the mortgage-renewal cliff as debt-servicing ratios (which is the amount of income that consumers spend on overall debt) have dropped. A major reason for that decline is that Canadian wages have grown quite fast, Ms. Solovieva wrote.
“Faster income growth cushioned a meaningful share of the interest-rate shock,” read the report. “This has turned a mortgage ‘cliff’ into a much gentler ‘hill.’ ”
The situation today is nothing like the grim predictions in 2023 that the renewal cliff would be a “ticking time bomb” for more than two million Canadians who would renew mortgages in 2025 and 2026.
Meanwhile, TD’s report says the trend of cheap mortgages renewing into higher rates is starting to reverse. Ms. Solovieva predicted that people will on average renew into cheaper mortgage rates starting in 2026, thanks to two years of rate cuts from the Bank of Canada.
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