Homeowners are increasingly feeling the effects of Toronto mortgage stress as borrowing conditions remain tight in 2025. With a wave of mortgage renewals coming due and fixed rates still above pre-pandemic lows, many are facing higher monthly payments, shrinking affordability, and heightened financial pressure. As the impact spreads across the city, it’s reshaping household budgets and contributing to subtle shifts in market dynamics.

Mortgage Renewals Push Payments Higher

Many Toronto homeowners who secured low fixed-rate mortgages between 2020 and 2021 are now approaching renewal periods, facing rates that are up to twice as high as before. Five-year fixed mortgage rates currently range from 4.0% to 4.5%, depending on the lender and product.

The Bank of Canada’s policy rate remains at 2.75% as of July 2025. While gradual rate cuts are anticipated over the coming year, today’s elevated borrowing costs mean renewed mortgage payments are jumping:

• The average household renewing in 2025 is expected to see a 10% increase in payments, with a further 6% increase projected for 2026.
• Some fixed-term borrowers are facing payment hikes of 15% to 20%, depending on the original rate and outstanding amortization.
• Variable-rate borrowers with adjustable payments may see slight relief, but overall affordability remains stretched.

Despite the payment increases, the Bank of Canada has noted that over 90% of borrowers remain within their original stress-tested thresholds.

Delinquency Trends Reveal Financial Strain

Signs of mortgage stress are increasingly apparent in recent credit data. Ontario leads the country in rising delinquency, and the trend is most pronounced in Toronto:

• Ontario’s 90-day mortgage delinquency rate rose to 0.24% in Q1 2025, a 71.5% increase year-over-year – the steepest provincial jump in Canada.
• In Toronto, non-mortgage delinquency (including credit cards and auto loans) has risen by 24.28% compared to the same period last year. The total delinquency rate now stands at 2.17%, the highest among major Canadian cities.

Although absolute mortgage delinquency rates remain low, the upward momentum underscores the financial pressure many homeowners are now under. A growing number are relying on credit to manage rising costs, further compounding household vulnerability.

Toronto Real Estate Under Shifting Conditions

While mortgage stress puts pressure on borrowers, it is also contributing to more balance in Toronto’s housing market. After several years of aggressive price growth and tight inventory, conditions in mid-2025 have begun to moderate:

• GTA home sales rose 8.1% month-over-month in June 2025, reaching a five-month high with 5,068 units sold.
• However, sales were down 2.4% year-over-year, indicating underlying softness.
• The average home price fell by 0.9% month-over-month to C$978,200, with a 5.5% annual price decline.
• Listings increased by 7.7%, giving buyers more options and reducing upward pressure on prices.

This trend toward a more balanced market offers potential opportunity for buyers, but higher borrowing costs continue to limit overall affordability.

Homeowner Response to Toronto Mortgage Stress

Households are adapting in varied ways to Toronto mortgage stress. A recent survey conducted by TD Bank found that nearly half of mortgage holders expect their payments to increase at renewal – and many are already making changes to prepare:

• 45% expect significantly higher monthly payments.
• 57% anticipate their living situation will be affected.
• 73% have started reducing discretionary spending.

Some of the most common adjustments include:

• Postponing home renovations
• Downsizing or considering less expensive neighbourhoods
• Adding a roommate or family member to share housing costs
• Using savings to offset rising interest expenses

This shift toward cost-conscious behaviour reflects a broader recalibration of financial priorities in response to rising mortgage obligations.

Broader Implications for Toronto’s Mortgage Stress

Toronto mortgage stress is not only impacting individual households – it’s also shaping trends across the GTA real estate landscape:

• Increased listings and reduced competition are giving buyers more negotiating power.
• Investor-owned condos, in particular, are under pressure as carrying costs rise and rental markets soften.
• Pre-construction units are seeing weaker demand, leading to longer inventory periods and cautious developer activity.

On a national level, housing forecasts suggest a 4% price decline in Toronto for 2025, with a slow return to growth expected in 2026. Vancouver and Montreal are experiencing similar patterns, but Toronto’s affordability crunch and debt loads remain among the most pronounced.

Strategies To Manage Toronto Mortgage Stress

As mortgage renewals and rising costs squeeze budgets, Toronto homeowners can take several proactive steps to reduce the impact of stress:

1. Renew early or shop around: Don’t accept the first renewal offer – many non-bank lenders offer lower rates or more flexible terms.
2. Extend your amortization: Stretching the payment schedule from 20 to 25 or 30 years can reduce monthly payments.
3. Make lump sum payments: Reducing principal ahead of renewal lowers the future interest burden.
4. Consider a fixed vs. variable comparison: In some cases, switching to a variable-rate mortgage may offer short-term relief if rates are expected to drop.
5. Review your household budget: Factor in rising insurance premiums, utilities, and debt payments when planning for renewals.

Each of these strategies requires consideration of your long-term goals, but collectively they offer practical ways to stay ahead of growing financial pressure.

Looking Ahead

Toronto mortgage stress is expected to persist into 2026 as renewal waves continue and interest rates remain well above historic lows. While most borrowers will be able to manage the increases, the financial margin for many is narrowing. Encouragingly, delinquency rates, though rising, are still modest, and most homeowners remain resilient. Those planning ahead, budgeting proactively, and exploring financing alternatives will be best positioned to weather this period of tightening affordability. As the GTA housing market enters a more cautious phase, knowledge and preparation will be key to navigating renewal periods successfully and sustaining financial stability amid continued uncertainty.