# 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. This guide explains why a 1- or 2-year fixed mortgage term may be the smartest strategic choice for 2026 renewals — offering flexibility to benefit from potential rate cuts without locking in long-term. We cover the November 21, 2024 stress test exemption for uninsured borrowers switching lenders, the key differences between CMHC-insured and uninsured renewal eligibility, a rate comparison across short and long terms, and actionable steps to help you shop confidently and manage your payments.

Category: Renewal
Last verified: 2026-02-18
Source: https://ratellow.com/guides/short-term-fixed-renewal

## TL;DR
- 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.
- 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.
- 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.
- 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.

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

- 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.
- 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.
- 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.

## Strategic Case for 1-2 Year Fixed Terms (Institutional Brief)
This guide provides an institutional-grade breakdown of the November 21, 2024 OSFI (Office of the Superintendent of Financial Institutions) regulatory reforms and their practical impact on client renewal strategy in 2026. Key focus areas include the stress test exemption for uninsured borrowers switching lenders, the insured vs. uninsured eligibility distinction, short-term fixed rate positioning relative to the current Bank of Canada rate environment, and provincial cost considerations such as Quebec notarial fees that affect lender-switch economics. Use this content to support client conversations around payment shock management, rate flexibility, and lender negotiation leverage during the 2025–2026 renewal wave.

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

### What are the regulatory implications of the Dec 2024 reforms on short terms?
Breakdown Table: Down Payment Calculation for a $1.5M Loan

| Component                | Amount           | Rate  | Calculation            |
|--------------------------|------------------|-------|------------------------|
| First Portion            | $500,000         | 5%    | $500,000 x 0.05 = $25,000 |
| Remainder                | $1,000,000       | 10%   | $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.*


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

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

## Sources
- BANKOFCANADA — https://www.bankofcanada.ca/2025/07/staff-analytical-note-2025-21/#Introduction
- OSFI-BSIF — https://www.osfi-bsif.gc.ca/en/news/backgrounder-final-capital-adequacy-requirements-guideline-2026