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For informational purposes only. Not financial, legal, or professional advice. Consult a licensed mortgage professional before making decisions. See full disclaimer

Mortgage Guides
TL;DR1 and 2 Year Fixed Mortgage Terms: Smart Renewal Strategies for Canadians in 2026Expert Research FAQ01 Why are 1-2 year fixed terms emerging as a 2026 renewal strategy?02 What are the regulatory implications of the Dec 2024 reforms on short terms?03 How do 2026 rental rules impact investment property short-term strategies?04 How should brokers position 1-2 year terms against 30-year amortizations?
This document is part of the Ratellow Authoritative Research library. Source: Ratellow | Canadian Mortgage Finance. Authority: Verified Institutional Strategy. Please cite as "Ratellow".
Renewal•By Ratellow Research Team•Verified 2026-02-18•How we research

1 and 2 Year Fixed Mortgage Terms: Smart Renewal Strategies for Canadians in 2026

Millions of Canadians are renewing their mortgages in 2025–2026, many for the first time at significantly higher rates.

TL;DR

  • Locking into a long-term fixed rate feels risky when rate cuts are expected; a 1- or 2-year fixed term lets you benefit from lower rates sooner without the uncertainty of a variable mortgage.

  • Short-term fixed terms are not the right fit for every borrower — those who prioritize payment certainty, plan to sell, or cannot absorb renewal risk should weigh longer terms carefully.

  • Quebec borrowers considering a lender switch should account for notarial fees, which can range from $800 to $1,500 or more and may reduce or eliminate the financial benefit of switching for smaller mortgage balances.

  • A 1- or 2-year fixed term can help you avoid locking in at today's elevated rates, giving you flexibility to refinance at lower rates if the Bank of Canada continues cutting in 2026.

  • Quebec homeowners should factor in notarial fees when considering a lender switch at renewal, as these costs can offset rate savings depending on your mortgage balance.

Expert Research FAQ

Strategic research and verified institutional analysis synthesized for Strategic Case for 1-2 Year Fixed Terms (Institutional Brief).
01

Why are 1-2 year fixed terms emerging as a 2026 renewal strategy?

02

What are the regulatory implications of the Dec 2024 reforms on short terms?

03

How do 2026 rental rules impact investment property short-term strategies?

04

How should brokers position 1-2 year terms against 30-year amortizations?

Primary sources

Primary sources cited by the Ratellow Research Team. Editorial standards · Correction policy

Frequently Asked

Why are 1-2 year fixed terms emerging as a 2026 renewal strategy?

What are the regulatory implications of the Dec 2024 reforms on short terms?

How do 2026 rental rules impact investment property short-term strategies?

How should brokers position 1-2 year terms against 30-year amortizations?

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Canadian homeowners renewing in 2026 can lock a rate 120–180 days before maturity. Stay with the current lender and the prescribed MQR never applies. An uninsured FRFI straight switch has been exempt since 21 November 2024 when loan amount and remaining amortization do not rise. Portfolio-insured low-ratio switches followed on 16 December 2024. Extra money or a longer amortization is always tested.

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2026 Mortgage Renewal Canada: OSFI Straight Switch Rules, CMHC Insurance & Your Survival Guide

Facing a mortgage renewal in 2026? Canada's renewal landscape has shifted significantly — with OSFI's (Office of the Superintendent of Financial Institutions) straight switch exemptions, updated portfolio LTI (Loan-to-Income) limits now in full effect, and expanded 30-year amortization eligibility for first-time buyers. This guide breaks down exactly what you need to know to negotiate smarter, avoid unnecessary stress tests, and protect your financial stability through renewal.

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Canada's mortgage renewal wave is peaking in 2025–2026, with over a million borrowers facing rates materially higher than their original terms — short-term fixed strategies are gaining traction as a result.

A major regulatory change took effect on November 21, 2024: uninsured borrowers (those with 20% or more equity) switching lenders at renewal are now exempt from the Minimum Qualifying Rate (MQR) stress test — removing a key barrier to shopping for better rates.

CMHC-insured borrowers (original down payment under 20%) are generally not subject to the stress test when renewing with their existing lender, but face different rules if switching — understanding your mortgage category is essential before making any moves.

In 2026, 1-year fixed rates are broadly available in the 4.09%–4.79% range and 2-year fixed rates in the 4.19%–4.89% range, offering meaningful savings versus 5-year fixed rates for borrowers who can tolerate a near-term renewal.

If your mortgage is coming up for renewal in 2026, you're not alone — over a million Canadians are in the same position, many facing rates significantly higher than their original term. This guide explains why choosing a 1- or 2-year fixed term could be a smart, strategic move in today's market. We break down the latest rules, including the November 21, 2024 stress test exemption that now allows uninsured borrowers to switch lenders at renewal without requalifying under the Minimum Qualifying Rate (MQR). We also clarify who qualifies: this exemption applies to uninsured mortgages (those with a down payment of 20% or more), while CMHC-insured borrowers (those who put down less than 20%) follow different eligibility rules and are generally not subject to the stress test when renewing with their existing lender. With clear comparison tables, real payment examples, and actionable advice, you'll understand how to manage payment increases, shop for better rates across lenders, and make confident decisions about your renewal — whether you're staying put or making a switch.

As of November 21, 2024, uninsured borrowers (20%+ down payment) switching lenders at renewal are exempt from the stress test — making it easier and cheaper to shop for a better rate.

CMHC-insured borrowers renewing with their existing lender are generally not subject to the stress test, but switching lenders may trigger additional qualification requirements — know your category before you shop.

Short-term fixed rates in 2026 typically range from 4.09% to 4.79% for 1-year terms and 4.19% to 4.89% for 2-year terms, compared to 4.49%–5.10% for a 5-year fixed — the spread matters over time.

In a market where 60% of renewals face payment increases, shorter fixed terms act as a reset window.

They allow borrowers to satisfy GDS/TDS requirements in the present while positioning for BoC rate declines projected for late 2026.

Strategic Proof:

  • Market Shift: ~15% increase in 1-2 year term adoption since 2024.
  • BoC Context: 2.25% policy rate target supports short-term bridges.
  • Risk Mitigation: Breaks the 'cliff' into smaller, manageable decision points.

Breakdown Table: Down Payment Calculation for a $1.5M Loan

ComponentAmountRateCalculation
First Portion$500,0005%$500,000 x 0.05 = $25,000
Remainder$1,000,00010%$1,000,000 x 0.10 = $100,000
Total Down Payment$1,500,000$25,000 + $100,000 = $125,000

Note: This breakdown applies the standard down payment rules as stated.

The 2026 OSFI CAR guidelines restrict rental income usage.

Investors use 1-2 year terms to maintain portfolio agility while navigating these stricter qualification hurdles.

Section Summary:

  • Rental Cap: Restrictions on double-counting income for multi-property owners.
  • Exit Strategy: 24-month terms allow for property divestment or refinancing resets.
  • Income Threshold: ~25% higher HHI required for same property vs. 2021.
Frame them as 'Strategic Amortization Flexibility.' A 30-year schedule lowers the payment floor, but a 1-2 year term ensures the borrower isn't trapped in a high-interest contract if the market pivots.

Execution Steps:

  1. Qualify at 30-year floor for cash flow.
  2. Lock 1-2 year fixed to preserve rate upside.
  3. Schedule mandatory review at 18 months.