About 1.2 million Canadians are facing financial shock as the mortgage renewal date approaches in 2025, according to a report from the Canada Mortgage and Housing Corporation (CMHC). The reason is that most current mortgages were signed when interest rates were below 1%, meaning homeowners will face a significant increase in interest rates upon renewal.

Homeowners' Concerns

Alysha, a resident of Horseshoe Valley in Ontario, said she is worried about how she and her husband will manage the expected increase in mortgage costs.

“It’s not just the mortgage, but property taxes and all the other expenses that concern us,” Alysha said, noting that she and her husband are considering moving to Mexico due to the high cost of living in Canada.

Maria, a homeowner in Tottenham, Ontario, is facing a similar situation. She was paying 1.9% on her loan of $585,000, but she now expects interest rates to reach 3.99% or more, adding about $700 a month to her payments. She explained that she is considering extending the repayment period and reducing monthly payments to cope with the increase.

Expected Rise in Late Payments

The CMHC report anticipates an increase in late payments as 2025 approaches. In the second quarter of 2024, the delinquency rate was 0.192%, with approximately 13,000 families falling behind on their payments for more than 90 days. Nevertheless, the agency does not expect a large wave of defaults, citing the historical resilience of Canadians in the face of economic crises.

Mortgage Renewal Tips

For her part, Penelope Graham, Head of Content at Ratehub.ca, stated that banks will be very competitive in their offers at the start of the new year, but borrowers should look for the best deals rather than settle for current bank offers.

She clarified that the decision between a fixed or variable rate mortgage depends on an individual’s risk tolerance, as fixed rates are influenced by the bond market, while variable rates follow the Bank of Canada’s decisions.

Although the Bank of Canada recently decreased the overall interest rate by 175 basis points since June, forecasts remain uncertain about how economic variables, such as potential tariffs from the upcoming U.S. President Donald Trump, will impact the Canadian market.