Homeowners across Canada are bracing for the financial impact of mortgage renewals in 2025. For many, the anticipated rate increases will present significant challenges. Below, we’ll explore what this means for Canadians, the broader implications on the housing market, and strategies to secure the best deal.
Rising Mortgage Rates: A Looming Challenge
Alecia, a 63-year-old homeowner from Horseshoe Valley, Ontario, is among the 1.2 million Canadians facing a mortgage renewal in 2025. Her concerns reflect a widespread sentiment: “We have no idea how we will afford an increase,” she told CTV News Toronto.
Alecia’s $1 million mortgage was locked in when interest rates were historically low, at or below 1%. With rates now significantly higher, the financial strain on her household has intensified. Beyond the mortgage itself, escalating property taxes and living costs are compounding her worries.
The Scope of the Issue
According to the Canadian Mortgage and Housing Corporation (CMHC), over 85% of current mortgage holders locked in their rates during a period of record lows. Now, as they prepare for renewal, many homeowners will experience a payment “shock,” even with recent interest rate cuts by the Bank of Canada.
Maria, a 61-year-old from Tottenham, Ontario, is another example. Her $585,000 mortgage, previously locked at a rate of 1.9%, now faces renewal at rates as high as 3.99%. This adjustment would increase her monthly payments by $700. To manage, Maria plans to extend her amortization period and shift to monthly payments, a decision that will ultimately cost more in the long run.
Rising Mortgage Arrears and Delinquency Rates
The CMHC has already noted an uptick in mortgage delinquencies, a trend expected to continue in 2025. The national mortgage delinquency rate rose to 0.192% in Q2 of 2024, representing approximately 13,000 households late on payments by 90 days or more. This figure is up from 0.188% in Q1 and significantly higher than the record low of 0.14% in 2022.
Toronto’s housing market, in particular, may experience arrears levels unseen since 2012. Beyond mortgages, other types of credit—such as auto loans, credit cards, and lines of credit—are also seeing increases in delinquency rates.
What Homeowners Can Do to Prepare
Renewing a mortgage can feel daunting, especially amid rising costs. However, there are steps homeowners can take to mitigate the financial impact:
1. Research Competitive Rates
Penelope Graham, head of content at Ratehub.ca, advises homeowners to shop around for the best deal. Banks often reserve their most competitive rates for new clients, so renewing with your current lender without exploring options may result in higher costs.
2. Work with a Mortgage Broker
A mortgage broker can compare rates from multiple lenders and negotiate on your behalf. This approach can save time and potentially uncover deals that wouldn’t be available to you directly.
3. Consider Fixed vs. Variable Rates
Choosing between fixed and variable rates depends on your financial situation and risk tolerance. While fixed rates provide stability, variable rates may trend lower in 2025 as the Bank of Canada continues to adjust its monetary policy. It’s essential to evaluate your budget and consult a financial expert.
4. Adjust Payment Structures
Maria’s decision to extend her amortization period and shift to monthly payments is a common strategy to lower immediate costs. However, homeowners should weigh the long-term financial implications of such adjustments.
The Broader Market Outlook
While rising rates will undoubtedly strain many households, CMHC Deputy Chief Economist Tania Bourassa-Ochoa emphasizes Canadian resilience. “We’re not anticipating that all of these borrowers will go delinquent,” she said, pointing to the historical ability of Canadians to adapt during challenging times.
Similarly, Canada’s bank regulator and institutions like CIBC predict that the “payment shock” will be felt more at a micro level, with broader economic stability remaining intact.
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Final Thoughts
For the 1.2 million Canadians renewing their mortgages in 2025, preparation is key. By researching options, consulting professionals, and proactively adjusting budgets, homeowners can better navigate the challenges ahead. Though the road may be difficult, experts believe that Canadian resilience will help many overcome these hurdles.
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