Nearly one in 10 mortgage holders in the Toronto area may face significant hurdles refinancing or renewing their loans in 2027 if home prices remain at current depressed levels. According to a Bank of Canada financial stability report released in May 2026, these borrowers risk falling behind on payments as they lose the ability to tap into home equity or switch lenders due to declining property values.
Why are Toronto homeowners facing increased refinancing risks?
The primary driver of this vulnerability is the significant drop in real estate values. According to the Bank of Canada, the typical home price in the Toronto region is 33 per cent lower than the peak pricing seen in March 2022. As property values fall, homeowners see their loan-to-value (LTV) ratio worsen. This metric, which measures how much a homeowner owes relative to their property’s market value, becomes a barrier when it exceeds 75 per cent, the level the federal banking regulator considers risky for lenders.
The Bank of Canada estimates that 9 per cent of borrowers in the Toronto region could not qualify to refinance their loans next year, compared to a national average of 4 per cent.
How does the loan-to-value ratio impact mortgage renewals?
When home prices decline, borrowers often lose the ability to use their home equity to pay down other debts or refinance under more favorable terms. The central bank’s report notes that households needing to refinance to manage payments may find themselves ineligible if they lack sufficient equity to meet lender requirements. This creates a cycle where lower home prices increase the risk of homeowners falling behind on their payments.
The central bank’s projections focus on borrowers renewing in 2027 who have an LTV ratio above 80 per cent, limited household income to cover housing costs, and no remaining ability to extend their amortization period beyond the standard 25-year frame. If home prices were to drop by another 10 per cent, the share of Toronto-area borrowers unable to refinance would climb to 12 per cent, while the national figure would rise to 7 per cent.
What is the current state of mortgage delinquency in Canada?
Financial stress is already manifesting in the data. Carl Gomez, chief economist with Centurion Asset Management, stated, “I do expect more stress to continue.” This sentiment is backed by Equifax Canada data, which shows that the Toronto region’s delinquency rate on total mortgages outstanding climbed 57 per cent year-over-year. By the first quarter of 2026, the delinquency rate—defined as missing payments for at least 90 days—reached 0.41 per cent in the Toronto region.
In comparison, the national mortgage delinquency rate rose by 32 per cent year-over-year to 0.28 per cent. The higher delinquency rates in Toronto are linked to larger average loan sizes in one of the country’s most expensive real estate markets, which become increasingly difficult to manage when renewed at higher interest rates.
The Bank of Canada clarifies that even if borrowers cannot switch to a new lender, they should generally still be able to renew their mortgages if they stay with their existing lender and do not fundamentally change the terms of the loan.
Frequently Asked Questions
What is the difference between the Toronto and national delinquency rates?
According to Equifax Canada, the Toronto region saw a 57 per cent year-over-year increase in mortgage delinquencies, reaching 0.41 per cent in the first quarter of 2026. Nationally, the rate rose 32 per cent to 0.28 per cent.
What defines a “risky” loan-to-value ratio for lenders?
The federal banking regulator considers loan-to-value (LTV) ratios above 75 per cent to be risky for lenders, according to the Bank of Canada.
Can I still renew my mortgage if my home value has dropped?
Yes. The Bank of Canada indicates that borrowers who do not meet the criteria to switch lenders should still be able to renew their mortgages provided they remain with their existing lender and do not fundamentally alter the loan structure.
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