As escalating tensions in Iran drive oil prices higher, financial experts are raising alarms about the potential repercussions for Canadians poised to renew their mortgages in the coming year. With over 1.5 million households already having renewed their mortgages by late 2025 and an additional million set to follow suit in 2026, the stakes are increasing as market conditions shift.
Impact of Global Events on Local Markets
Recent developments in the Middle East have led to a spike in oil prices, which in turn has affected bond yields. This dynamic is crucial for mortgage rates, as lenders typically rely on bond yields to set their fixed mortgage pricing. According to Clay Jarvis, a mortgage expert at NerdWallet Canada, “Once oil prices skyrocketed in reaction to hostilities in and around Iran, yields followed suit.” This situation is particularly pertinent for Canadians, as fixed-rate mortgages have seen a slight uptick since the onset of the conflict.
Dan Eisner, CEO of True North Mortgage, confirmed this trend, noting, “We’ve probably seen fixed rates go up by at least a quarter of a percentage point right across the board from all lenders.” For homeowners facing renewal this year, the current climate adds a layer of stress, especially with fluctuations in three and five-year government bond yields.
Mortgage Rates on the Rise
As of this week, the lowest five-year fixed mortgage rate in Canada stood at 3.69 per cent, while the lowest five-year variable rate was 3.35 per cent, according to Ratehub. Jarvis emphasised that while some lenders have slightly increased their fixed rates, the changes have not been drastic. “It’s not to a nauseating degree,” he stated, suggesting that some borrowers may still secure rates below four per cent despite the uncertainties.
However, the unpredictability of the geopolitical situation is complicating the renewal process for many households. Jarvis likened the volatility to a “roller-coaster,” noting that each statement from political leaders can influence market conditions significantly. This uncertainty poses challenges for families trying to plan their financial futures.
The Challenge of Affordability
The mounting pressure on mortgage affordability comes at a time when many Canadians are already grappling with substantial mortgage debt. A report from Equifax Canada indicated that mortgage debt levels reached nearly $2 trillion in 2025, with many households experiencing “payment shock” during renewal periods—often leading them to switch lenders to secure more favourable terms.
Economist Moshe Lander from Concordia University warned that should the Bank of Canada opt to raise interest rates in response to inflation concerns, even modest increases will likely be reflected in mortgage rates. “If the Bank of Canada now has to consider increasing interest rates, you can bet that those are going to show up in mortgage rates,” he remarked.
Despite the tumultuous landscape, Eisner suggested that opting for a variable rate now may be a strategic move, allowing homeowners to lock in a rate later when conditions stabilise. “You could always lock it in at no cost,” he noted, highlighting a potential way for borrowers to navigate the current environment.
Why it Matters
The implications of rising oil prices and uncertain geopolitical conditions extend beyond mere numbers; they touch the very fabric of Canadian households’ financial stability. As families brace for mortgage renewals amid fluctuating rates and economic pressures, the risk of payment shocks and increased debt burdens looms large. The intersection of international conflicts and domestic economic realities underscores the fragility of financial planning in an unpredictable world, making it essential for Canadians to stay informed and adaptable.
