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Mortgage Renewal Math for Landlords: A 15 Per Cent Jump, a 1.9 Per Cent Cap

The last pandemic era five year fixed mortgages finish renewing by mid 2027, and the Bank of Canada puts the average payment increase at about 15 per cent. Ontario's 2027 rent guideline is 1.9 per cent and BC's is 2.2 per cent, so here is how to size the gap and the renewal rule that helps.

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The Bank of Canada's May 2026 Financial Stability Report put a number on the end of the pandemic mortgage cohort. The last of the five year, fixed payment mortgages taken out during the pandemic renew over the 12 months following that report, which runs the tail of the group into the first half of 2027. That cohort is about 12 per cent of all outstanding mortgages in Canada, and on average those borrowers see their payments rise by about 15 per cent.

When one of those mortgages sits on a rental property, the increase arrives in a single step, on one date. The income side does not move that way. Ontario's rent increase guideline for 2027 is 1.9 per cent. British Columbia's maximum allowable increase is 2.2 per cent, down from 2.3 per cent in 2026, and it takes effect January 1, 2027. Each can be applied once in a 12 month period, with notice. A 15 per cent cost increase and a 2 per cent revenue ceiling do not meet, and no notice form closes the distance.

Who this hits

The group is narrow: a five year fixed mortgage with a fixed payment, signed during the pandemic, which puts most originations in 2021 and early 2022 and their maturities in the window we are in now. Renewed in 2024 or 2025 and your step is behind you. Held a variable rate whose payment moved during the term and your adjustment came in pieces rather than at maturity.

One distinction gets blurred in coverage of this. The same report estimates that about 4 per cent of borrowers nationally, and about 9 per cent in the Toronto area, would be unable to refinance at renewal at current prices. Refinancing changes the loan: pulling equity out, or raising the balance. Renewing the same balance on the same amortization is a different transaction, so that 4 per cent is not a count of owners who cannot renew.

Put the two numbers in the same row

Most owners keep these figures in separate places: the renewal quote in an email, the rent cap in a leasing note. Put them in one row, in dollars per year, for every mortgaged unit.

  1. Current monthly payment, times 12.
  2. Quoted renewal payment, times 12. The difference is your cost step.
  3. Current monthly rent, times 12, times your province's percentage. That is your legal revenue step, before vacancy.
  4. Subtract. What is left is the gap you fund from somewhere other than rent.

Here is the arithmetic with round numbers, chosen to show the shape rather than drawn from any market. A unit rents for $2,000 a month and carries a payment of $1,600. A 15 per cent payment increase costs $240 a month, or $2,880 a year. A 1.9 per cent guideline increase raises $38 a month, or $456 a year. The gap is about $2,400 on one unit, and it does not close the following year, because the next guideline applies to the new rent rather than to the shortfall.

What the rent cap can and cannot do

The guideline caps an increase to a sitting tenant. It says nothing about your costs. Three consequences follow.

Turnover is the only moment a rent resets. In Ontario the guideline does not apply when a tenancy ends and the landlord and a new tenant agree on rent. That makes a vacancy the one point where the market sets your rent instead of a percentage, and also the point where the unit earns nothing. The decision is a trade, not a win.

The calendar is strict in both provinces. Ontario requires at least 90 days written notice on the Landlord and Tenant Board form, and 12 months since the last increase or the start of the tenancy. British Columbia requires a minimum of three months notice, one increase every 12 months, and no rounding up. Miss the date and you wait a year. For the Ontario sequence, see how to serve an Ontario rent increase notice without losing the year.

Some units sit outside the guideline. Ontario's does not apply to new buildings, additions, and most new basement apartments first occupied for residential purposes after November 15, 2018, nor to community housing, long term care homes or commercial property. Confirm which of your units are exempt before assuming a cap applies to all of them.

The rule change that works in your favour

Since November 21, 2024, OSFI no longer prescribes a minimum qualifying rate for an uninsured straight switch at renewal. A straight switch means moving an existing uninsured mortgage from one federally regulated financial institution to another with no increase in the remaining contractual amortization period or the loan amount. Mortgages on small rental properties are usually uninsured, so this is the category the change covers.

In practice, you can take your renewal to a competing bank without being qualified at the greater of your contract rate plus two percentage points or 5.25 per cent. The lender still assesses the loan like any other new origination under Guideline B-20, so income and debt service still get reviewed and stressed. What is gone is the test that used to keep borrowers tied to the lender they started with. Shopping a renewal is now a pricing exercise rather than a requalification.

Watch the two boundaries, because that is where the exemption is lost. Raise the loan amount, or stretch the amortization, and the transaction stops being a straight switch. Extending amortization is a real lever on the monthly payment, and your current lender can do it, so price it against what a switch would have saved before you take it.

Before the maturity date

  • Put every mortgage maturity date on the same calendar as each tenancy's rent increase anniversary.
  • Get your lender's renewal quote and at least one competing quote about 120 days out.
  • Re-run each unit's break even on the quoted payment, not the current one.
  • Mark which units are exempt from the guideline and which are capped.
  • Settle the amortization question before you are at a signing table.

This cohort is finite. The Bank expects that by the second half of 2027, nearly all mortgage holders facing large payment increases will have renewed. That makes it a timing problem with an end date rather than a permanent one, but only for owners who price the renewal before the renewal prices them.

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