Shift to variable, shorter-term mortgages raises borrowers’ rate exposure: CMHC

Variable rates and shorter fixed terms now account for the large majority of new uninsured mortgages in Canada, according to an analysis by Canada Mortgage and Housing Corporation.

In the first quarter of 2026, 35.5% of new uninsured mortgages had variable rates, while 49.5% had fixed terms of less than five years, according to CMHC calculations based on Bank of Canada data. Just 14.9% had fixed terms of five years or longer, down from 22.8% in the first quarter of 2022.

A similar shift has taken place among insured borrowers. Variable rates accounted for 33.6% of new insured mortgages in the first quarter, while 30.7% had fixed terms of less than five years. The share with fixed terms of five years or longer fell to 35.7%, from 53.2% four years earlier.

“Recent inflation volatility has reminded Canadians that mortgage-renewal risk is real,” CMHC Deputy Chief Economist Aled ab Iorwerth wrote in the agency’s Housing Observer.

CMHC’s Mortgage Consumer Survey also found that 35% of borrowers who renewed a mortgage reported increased financial pressure due to changes in interest rates. Another 25% of mortgage consumers said they regretted at least one characteristic of the mortgage they selected.

Households bear much of the rate risk

Ab Iorwerth said Canada’s mortgage system passes changes in borrowing costs to households relatively quickly because most borrowers must renew every few years.

“Canada’s mortgage system places a large share of the risk from interest-rate changes on households,” he wrote.

That differs from the United States and much of continental Europe, where long-term fixed-rate mortgages are more common and funding structures allow lenders to manage interest-rate risk differently, according to ab Iorwerth.

“The structure is associated with strong banking-system resilience and limited taxpayer exposure, but greater household sensitivity to interest-rate changes,” he wrote.

Ab Iorwerth said the shift does not mean borrowers are making poor decisions, noting that mortgage choices depend on expectations for interest rates and inflation, as well as income risk, refinancing opportunities and household mobility.

“As households increasingly choose shorter mortgage terms, they also take on greater exposure to future interest-rate changes,” he wrote.

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Last modified: September 9, 2026