As 2025 draws closer, over 1 million Canadian homeowners are facing a significant financial change—mortgage renewal. If you’re among the 1.2 million Canadians with a mortgage set to renew next year, this could mean higher payments and added financial pressure.
According to a recent report by the Canada Mortgage and Housing Corporation (CMHC), the majority of these mortgages were secured during a time when interest rates were at or below 1%. Now, with interest rates significantly higher, many homeowners are about to face mortgage renewals that could impact their finances.
What’s Happening with Interest Rates?
The Bank of Canada (BoC) has made several adjustments to its key interest rate throughout 2024, dropping it four times in an effort to manage inflation, which peaked at 8.1% in June 2022. After reducing the rate to 3.75%, many mortgage holders will soon be renewing their loans at rates much higher than they were initially accustomed to.
While the current rates are lower than the 5% level seen for much of 2023, they still pale in comparison to the historically low rates many Canadians locked in during the pandemic, which were as low as 0.25%.
The Impact on Homeowners
For over 1 million homeowners, this means a major increase in monthly mortgage payments. Homeowners who initially secured low-interest mortgages may now face significantly higher rates, which could increase their payments and place financial strain on household budgets.
The CMHC report also highlighted a slight increase in mortgage delinquency rates, with 0.19% of mortgages being over 90 days past due in Q2 of 2024, up from 0.14% in 2022. This may be an early indicator that many Canadians are struggling with the increased cost of borrowing, and the CMHC anticipates more delinquency in the future as mortgages are renewed at higher rates.
A Broader Economic Concern
The CMHC warns that the upcoming wave of mortgage renewals in 2025 and 2026, combined with higher interest rates, could put a strain on the Canadian economy. The national housing agency also noted that mortgage debt has been growing faster than inflation, leaving many borrowers vulnerable to financial pressure.
The situation isn’t just about higher monthly payments—it’s a broader issue that could exacerbate financial strain on Canadian families, especially if other debts like auto loans, credit cards, and lines of credit are also increasing in delinquency.
Ontario Homeowners: How Will You Be Affected?
If your Ontario home’s mortgage is up for renewal in 2025, it’s crucial to start planning ahead. The financial landscape is much different than when you first secured your loan, and you may be facing a steep increase in payments.
Do you expect to be able to handle the higher costs, or will the change be a financial challenge? How will your household budget be impacted by the higher mortgage payments? Will you need to explore refinancing options, or perhaps make cuts elsewhere in your expenses?
Your experience matters, and we want to hear from you. Share your story with us, and let’s shed light on the challenges faced by homeowners as they navigate the upcoming changes in mortgage rates.
As Canada moves into 2025, homeowners facing mortgage renewals must prepare for potentially higher payments and the financial implications that come with it. Being proactive in understanding your new rate and how it could impact your monthly finances is essential in managing the financial stress of mortgage renewal.
