PV, Mit & Jeff
Every Tuesday we take one topic and go deep. No headlines, no five story roundup. Just one story, all the way to the bottom.
A million homeowners are about to pay more for the same house. Meanwhile, our investors collect a monthly distribution for doing nothing. That is the power of owning the buildings instead of the mortgage.
Today's topic: the mortgage renewal wave. Over one million Canadian mortgages are set to renew in 2026, many of them locked in at pandemic era lows. The payment shock hitting these homeowners is real. And the ripple effects will reshape rental demand across the country for years to come. Want to talk about what this means for your portfolio?
That is the average monthly payment increase facing Canadian homeowners who locked in a five year fixed mortgage during the pandemic and are now renewing. That works out to roughly $5,100 more per year on the exact same house. No renovation. No extra square footage. Just a higher rate on the same debt. For over a million households, the math on homeownership just changed overnight.
According to the Bank of Canada, roughly 60% of mortgage holders will face higher payments upon renewal in 2025 and 2026. That is not a rounding error. That is a majority of Canadian homeowners absorbing a payment shock at the same time. Most of these borrowers locked in five year fixed rates between 2020 and 2021 when rates sat around 1.5% to 2%. They are now renewing into a market where the best available rates hover around 4% or higher. The overnight rate sits at 2.25%, and with the next Bank of Canada decision on April 29 showing a 96.5% probability of another hold, relief from lower rates is not coming soon. CMHC data shows mortgage arrears have been climbing steadily since late 2023. A Globe and Mail survey found that one third of Canadian mortgage holders are already reporting challenges making their payments. And the biggest wave of renewals is still landing this year.
Put yourself in the shoes of a homeowner who bought an average priced home in 2020. You qualified at a low rate. You built your household budget around a monthly payment you could handle comfortably. Now, without buying anything new or adding a single dollar of debt, your mortgage payment jumps by $424 per month. That is an extra $5,100 per year. For many households, that is the difference between making ends meet and falling behind. Homeowners are cutting spending, delaying major purchases, and in some cases reconsidering whether to hold their property at all. Some will sell. Some will downsize. And a meaningful number will pivot from owning to renting. TD Economics noted that while the renewal wave will not collapse the market overnight, the financial pressure will linger for years as each cohort of borrowers rolls into higher rates. This is not a one quarter event. It is a multi year structural shift.
London, Ontario · CMHC Financing + GST Rebate Eligible
Government Grants + De-Risked Capital Stack
Targeted Returns: 24% to 27% Annualized
The downstream effect of mortgage renewal shock is straightforward. When existing homeowners feel the squeeze, prospective buyers get nervous. Why jump into homeownership when you can see millions of people regretting the cost of their own mortgages? TD already scrapped its 2026 housing outlook, swinging from a +9.3% sales forecast in December to a 1.8% decline today. Buyers are sitting on the sidelines. And when buyers sit on the sidelines, they rent. National vacancy has risen to 3.1%, but that number is heavily skewed by new luxury condo supply in Toronto and Vancouver. In secondary markets like Southwestern Ontario, workforce rental housing remains tight. Our portfolio vacancy sits well below the provincial average. The demand is not disappearing. It is just shifting from condos and single family homes into the exact type of housing we own: affordable, well managed apartment buildings in growing mid sized cities.
Every mortgage renewal wave creates a parallel rental demand wave. Here is what that looks like on the ground. Fewer first time buyers means fewer tenants leaving our buildings to purchase homes. Payment shock on existing owners means some will sell and return to renting. Construction costs continue climbing, with tariffs adding an estimated $9,000 per new home according to NAHB, and housing starts are forecast to drop 5% across Canada this year. Less new supply plus more demand equals stronger fundamentals for existing apartment portfolios. At Foundation Capital, our 7% annualized distribution does not change based on what the Bank of Canada does on April 29. Our buildings are already cash flowing. The rents are already coming in. Mortgage renewal shock does not hurt us. It helps us. It adds tenants, reduces turnover, and strengthens the case for the asset class we have been building for years. The best part? This is not a one year story. The renewal wave will continue into 2027 as the last cohort of pandemic era mortgages rolls over. The tailwind is structural and it is just getting started.
Cash-Flowing Apartment Buildings · Southwestern Ontario
Targeted Total Return: ~15%
Distributions: 7% Annualized, Paid Monthly
"I had cash sitting in my RRSP earning almost nothing. GICs at 4% that barely kept pace with inflation. My accountant mentioned there were exempt market options that RRSP accounts could hold. I found Foundation Capital and the timing worked out perfectly for my contribution room. The 7% in distributions alone beats what I was getting before."
Catch the latest from PV, Mit, and Jeff. Portfolio updates, new unit creation at our London buildings, and what the April 30 closing means for investors looking to lock in before the next unit price change.
Got a question about the fund, the portfolio, distributions, or what any of these trends mean for your capital? Reply to this email. We answer the best questions every Thursday. Nothing is off limits.
To your success,
PV, Mit & Jeff
P.S. While a million homeowners figure out how to absorb higher payments, FCPRET investors have been collecting monthly distributions without interruption. The April 30 closing is 16 days away. If you have been thinking about it, a 30 minute call is all it takes. Just reply to this email and say "interested" and we will set everything up for you.
