Over 1.2 million Canadians are expected to renew their mortgages in 2025, facing significantly higher interest rates compared to previous years, according to a recent Canadian Mortgage and Housing Corporation (CMHC) report.
For homeowners like Alecia from Horseshoe Valley, Ont., the rising costs present an uncertain future. “It’s not just the mortgage—it’s the property tax and all other expenses that are of concern,” she shared. Alecia, 63, is contemplating relocating to Mexico to escape Canada’s rising living costs, including the burden of a $1 million mortgage.
Maria, another Ontario homeowner, anticipates her monthly payments will increase by at least $700 due to interest rates climbing from 1.9% to nearly 4%. “We’re looking at extending the amortization and moving to monthly payments to cope,” she explained.
Mortgage Rates and Payment Challenges
The payment shock comes despite the Bank of Canada reducing interest rates by 175 basis points since last spring, following a historic high aimed at controlling inflation. Homeowners renewing mortgages this year can expect a 30% increase in payments on average, CMHC Deputy Chief Economist Tania Bourassa-Ochoa said.
Mortgage delinquency rates are also ticking upward. National arrears reached 0.192% in Q2 2024, up from 0.188% in Q1. Toronto, in particular, could see delinquency rates rise to levels not seen since 2012.
However, Bourassa-Ochoa stressed that a wave of foreclosures is unlikely. “Canadians have shown remarkable resilience historically, and we expect that trend to continue,” she said.
How Homeowners Can Navigate the Renewal Process
For homeowners renewing their mortgages, securing the best rate is crucial. Penelope Graham, head of content at Ratehub.ca, advises against blindly accepting renewal offers from existing lenders.
“The biggest mistake people make is signing the first offer they get,” Graham said. “Banks often reserve their most competitive rates for new clients, so it’s essential to shop around or work with a mortgage broker.”
Graham also highlighted the importance of choosing between fixed and variable-rate mortgages based on individual risk tolerance. Fixed-rate mortgages depend heavily on bond markets, while variable rates react to Bank of Canada announcements.
As Canadians navigate these financial challenges, the CMHC and financial experts urge homeowners to explore all options, from adjusting payment schedules to leveraging market competition among lenders. While 2025 is expected to test the financial resilience of many, proactive planning and informed decisions could help mitigate the impact of rising costs.