Renewal Rates, Costs and 2026 Rules
What determines your mortgage renewal rate in Canada?
The factors behind a Canadian mortgage renewal offer, from bond yields and prime to insurance status, equity tiers and retention pricing, and which ones you control.
Your mortgage renewal rate is built from two parts: the lender's cost of money for the term you choose, which follows Government of Canada bond yields for fixed rates and the Bank of Canada's policy rate for variable rates, plus a margin that depends on your mortgage's risk and on how hard the lender is competing for you. You cannot control the first part. You can influence the second through your insurance status, equity, term choice, timing and above all by showing the lender a written offer from a competitor.
This guide is part of the mortgage renewal rates overview. Figures are illustrative, not current rates.
Part 1: the lender's cost of funds
Fixed rates and bond yields
Canadian lenders fund fixed-rate mortgages partly through deposits, partly through wholesale markets and, for insured mortgages, through mortgage-backed securities and Canada Mortgage Bonds. The pricing of all of these is linked to Government of Canada bond yields. When the five-year bond yield rises, five-year fixed mortgage rates tend to rise within days or weeks; when it falls, fixed rates usually follow, often more slowly. That is why fixed rates can change between Bank of Canada announcements.
Variable rates and prime
Variable-rate mortgages are priced as a spread from the lender's prime rate, for example "prime minus 0.50%". Each lender sets its own prime rate, but the big banks move theirs when the Bank of Canada changes its policy rate, and in recent years their prime rates have sat about 2.2 percentage points above the policy rate. The Bank of Canada announces rate decisions on eight scheduled dates a year, published on its website.
At renewal, the spread is what you negotiate. A change in prime later in the term moves your rate up or down by the same amount.
Part 2: the margin on your mortgage
| Factor | Why lenders price it | Typical effect |
|---|---|---|
| Insured mortgage | Default insurance from CMHC, Sagen or Canada Guaranty covers the lender's loss | Often the lowest rates |
| Insurable but uninsured | Meets insurance rules, so the lender can insure it in bulk at its own cost | Often a middle tier |
| Uninsurable | For example a refinance, an amortization beyond the insured limit, or a home value above the insured cap | Usually higher rates |
| Loan-to-value | Less equity means more loss if the home is sold in default | Some lenders price in tiers, such as at 65% or 80% |
| Rental or non-owner-occupied | Higher default risk and different capital rules | Usually higher |
| Small balance | Fixed costs of the mortgage spread over less interest | Some lenders charge more on small balances |
| Retention | Many borrowers sign without shopping | First renewal offer often above best rate |
The insured versus uninsured difference is explained in insured vs uninsured renewal rates.
Worked example: a lump sum that crosses an equity tier
Suppose a lender prices uninsured five-year fixed renewals in tiers, with a lower rate at or below 65% loan-to-value. Illustrative figures:
- Estimated home value: $700,000
- Balance at maturity: $462,000, which is 66% of value ($462,000 / $700,000)
- Offer above 65%: 4.49%; offer at or below 65%: 4.39%
- Remaining amortization: 20 years
To reach 65%, the balance must be $455,000 or less ($700,000 x 0.65). A lump sum of $7,000 on the maturity date gets there.
| Scenario | Balance | Rate | Payment | Interest over 5 years |
|---|---|---|---|---|
| No prepayment | $462,000 | 4.49% | $2,910.03 | $94,311.34 |
| $7,000 prepayment | $455,000 | 4.39% | $2,841.94 | $90,754.47 |
Interest over the term falls by $3,556.87. Part of that comes from owing $7,000 less, and part from the lower rate. Before doing this, check that the lender actually uses tiers, what value it will accept (it may want an appraisal), and that you keep an emergency fund. Run your own figures in the renewal payment calculator.
Part 3: the product you choose
Each combination of term and rate type is priced separately. A shorter fixed term can be cheaper or dearer than a five-year term depending on the yield curve, and variable rates can be above or below fixed rates at different times. Comparing a three-year rate from one lender with a five-year rate from another tells you nothing about which lender is cheaper. See choosing a renewal term and fixed vs variable at renewal.
Product features also change the price. A "limited features" or "no frills" mortgage may have a lower rate but tighter prepayment privileges, a higher penalty or restrictions on porting. A mortgage with cash-back usually carries a higher rate and a clawback if you leave early.
Part 4: timing and competition
- Rate holds. A lender that offers a 120-day rate hold protects you if rates rise. If rates fall before closing, many lenders will give you the lower rate, but ask.
- Early renewal windows. Your current lender may let you renew a few months early without penalty, which lets you lock a rate before maturity.
- Competition. The single most effective lever is a written offer from another lender or a licensed broker for the same term, rate type and features. See how to negotiate a renewal offer.
What does not change your rate much at renewal
If you renew with your current lender, most lenders do not re-check your income or credit, so a modest change in either usually does not change the offer. That changes if you switch lenders, refinance, add a borrower or increase the balance. Then the new application is assessed as a new mortgage.
Checklist: what to know before you ask for a rate
- Balance at maturity and remaining amortization
- Whether the mortgage is insured, and by which insurer if your documents say
- An estimate of your home's value, from recent local sales or a property assessment
- Whether the charge is standard or collateral
- The term and rate type you want, and one alternative
- Your credit reports from Equifax Canada and TransUnion Canada
- Your prepayment plans and any chance of selling during the term
Frequently asked questions
Why did fixed rates change when the Bank of Canada did not move?
Fixed rates follow bond yields, which react to inflation data, economic news and global markets every day. The policy rate moves variable rates through prime.
Is a broker's rate always lower than my bank's?
Not always. Brokers work with many lenders and can often find a lower rate, but your bank may match it for a retention offer. Compare the full terms, not only the rate.
Does my province change the rate?
Rates are mostly set nationally by big lenders, but regional credit unions and caisses price for their own markets, and costs such as legal or notary fees differ by province.
Will paying down my mortgage before renewal always lower the rate?
Only if your lender prices by loan-to-value tiers and the prepayment moves you into a lower tier. Otherwise it lowers the interest you pay but not the rate.
Sources
- Bank of Canada — policy rate announcements and bond yield data
- Canada Mortgage and Housing Corporation — mortgage loan insurance rules and limits
- Office of the Superintendent of Financial Institutions — mortgage underwriting rules for federally regulated lenders
- Financial Consumer Agency of Canada — comparing mortgage offers and features
