Introduction
As 2025 unfolds, Canadian homeowners face a challenging mortgage renewal landscape shaped by fluctuating interest rates, economic uncertainties, and financial pressures. According to the Royal LePage 2025 Mortgage Renewal Survey, over half of mortgage holders expect their monthly payments to rise upon renewal, with many anticipating significant financial strain. However, declining interest rates and potential Bank of Canada rate cuts offer a silver lining.
In this comprehensive guide, we will break down key findings from the Royal LePage survey, explore regional mortgage trends, and provide actionable strategies for homeowners preparing for renewal.
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1. The Mortgage Renewal Landscape in 2025
a) The Reality of Rising Payments
- 57% of Canadian homeowners expect their mortgage payments to increase upon renewal.
- 35% anticipate a slight increase, while 22% foresee a significant jump.
- 81% of those expecting an increase say it will strain their finances.
For many, this shift is due to the expiration of ultra-low pandemic-era interest rates. While rates have declined from their peak, they remain higher than in 2020-2021 when most homeowners secured historically low mortgages.
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b) Adapting to Higher Borrowing Costs
To cope with increased payments:
- 60% of homeowners plan to cut discretionary spending.
- 43% will reduce travel expenses.
- 36% will scale back savings and investments.
- 23% are considering obtaining a second job or an additional income stream.
These adjustments highlight the prioritization of homeownership, with Canadians willing to make financial sacrifices to keep their homes.
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2. Regional Mortgage Renewal Trends
a) Ontario
- 58% of homeowners expect an increase in payments, with 23% foreseeing a significant hike.
- 55% will cut discretionary spending, and 39% plan to reduce savings or investments.
- Fixed-rate mortgages remain popular, but 31% are considering switching to variable rates.
b) Quebec
- The lowest rate of expected mortgage increases (51%).
- 78% of homeowners will not change their living arrangements despite rising costs.
- 31% of borrowers are considering variable-rate mortgages, capitalizing on rate cuts.
c) British Columbia
- 53% of homeowners anticipate an increase, with 82% expecting financial strain.
- Confidence is improving due to lower borrowing costs, leading to increased market activity.
- 67% plan to renew with a fixed-rate mortgage, while 29% favor variable rates.
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d) Alberta
- The highest rate of expected payment increases (60%), with 25% foreseeing a significant jump.
- Homeowners are considering downsizing or relocating to more affordable areas.
- Borrowers are actively exploring alternative mortgage products to manage costs.
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e) Saskatchewan & Manitoba
- 63% of homeowners expect higher payments, and 89% anticipate financial strain.
- 47% will choose a five-year fixed-rate mortgage to secure stability.
- Move-up buyers are returning to the market, taking advantage of lower rates.
f) Atlantic Canada
- 64% of homeowners expect mortgage payments to rise, the highest among provinces.
- 61% are confident in maintaining their current living situation.
- Equity-rich homeowners are leveraging property values to offset costs.
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3. Shifts in Mortgage Preferences
a) Variable-Rate Mortgages Gain Popularity
- 66% of renewing borrowers plan to choose a fixed-rate mortgage (down from 75%).
- 29% will opt for a variable-rate mortgage (up from 24%).
- 20% of fixed-rate holders are switching to variable rates.
This trend suggests confidence in continued Bank of Canada rate cuts, which could lower borrowing costs for those willing to accept short-term fluctuations.
b) Changing Mortgage Terms
- 37% of respondents prefer a five-year term.
- 19% are considering a three-year term, reflecting uncertainty about long-term rates.
Flexibility is key in today’s market, as homeowners weigh short-term savings against long-term rate stability.
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4. Economic Factors Influencing Mortgage Renewals
a) Trade War with the U.S. & Inflation Concerns
- U.S.-Canada tariff disputes threaten economic stability.
- Higher costs for building materials could impact new home construction.
- The Bank of Canada may accelerate rate cuts to counteract recession risks.
b) The Bank of Canada’s Rate Strategy
- Since June 2024, the Bank of Canada has cut rates by 200 basis points.
- Further cuts are expected, particularly if trade tensions impact economic growth.
- Borrowers renewing in mid-to-late 2025 could benefit from lower rates.
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5. Mortgage Renewal Strategies for Homeowners
a) Shop Around for the Best Rates
Lenders’ renewal offers may not always be the best deals. Compare rates from multiple financial institutions or consult a mortgage broker to secure the most favorable terms.
b) Consider Shorter-Term Fixed or Variable Rates
With interest rates declining, shorter-term fixed mortgages (2-3 years) or variable-rate options may offer savings for borrowers who anticipate further cuts.
c) Extend Amortization to Reduce Monthly Payments
Extending amortization from 25 to 30 years can ease financial strain by lowering monthly payments, though it increases long-term interest costs.
d) Leverage Home Equity for Debt Consolidation
Homeowners with substantial equity may consider refinancing to consolidate higher-interest debt, improving overall financial flexibility.
e) Adjust Your Budget in Advance
Prepare for higher payments by cutting discretionary expenses, reassessing savings strategies, and creating a financial buffer before renewal.
f) Explore Government Policy Changes
- No More Stress Test for Switching Lenders: As of late 2024, borrowers can switch lenders at renewal without a mortgage stress test, providing greater flexibility in choosing competitive rates.
- Longer Amortization for First-Time Buyers: Government initiatives allow extended amortization periods for insured new-build mortgages, improving affordability.
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6. What’s Next for Canadian Homeowners?
The 2025 mortgage renewal cycle presents challenges, but also opportunities. While higher payments are inevitable for many, declining rates, flexible mortgage options, and proactive financial planning can help homeowners navigate their renewals with confidence.
As the Bank of Canada continues adjusting its monetary policy and economic factors evolve, homeowners should stay informed and consider working with mortgage professionals to make the best financial decisions for their future.
Final Thought: The key to a successful mortgage renewal is preparation. By exploring different rate options, making strategic financial adjustments, and staying informed about market trends, Canadians can secure the best possible mortgage terms while maintaining financial stability.
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