Over 35 percent of Canadians hold a mortgage,¹ and in 2024 and 2025 alone more than 2.2 million mortgages have been facing renewal.² The Bank of Canada rate reductions over 2024 have been welcome news for mortgage holders, though many still face the prospect of higher mortgage rates at renewal. This is because a large number of these mortgages were issued when rates were at historical lows. In August 2021, the CMHC five-year fixed rate fell to 3.2 percent.³ While rates have since risen, it’s worth recalling that they remain well below the highs of the 1980s when rates soared to 21.75 percent!

What does this mean for borrowers?

For most Canadians holding fixed-rate mortgages, rate changes won’t affect payments until renewal. Even a small increase in rates can lead to substantially higher costs. For example, a two percent increase on a five-year, fixed-rate mortgage of $330,000 (the average value of a new loan in 2024) could lead to over $100,000 in additional interest costs over the life of the mortgage (chart).

If you or a family member has a mortgage up for renewal, it may be an ideal time to reassess your options. Here are some considerations:

Assess whether your financial situation has changed. If your financial circumstances or goals have shifted, adjusting your mortgage may better suit your needs. With rising living costs, you might consider lowering payments by extending the term length or amortization period. On the other hand, if you have extra funds, paying down the mortgage faster could help offset the effects of higher rates and lead to lower interest costs over the mortgage’s life.

Consider re-evaluating your mortgage terms. This may be an excellent time to reconsider the options available. You may want to reassess whether a fixed or variable rate better suits your situation: fixed rates offer stability, while variable rates can provide savings if rates decline. Additionally, consider term length: shorter terms provide flexibility by not locking you into a long-term commitment, especially if rates decline. Reviewing payment frequency or amortization period can also impact both the speed at which you pay down the mortgage and the total interest paid over the loan’s life. If you’re thinking about refinancing or switching lenders, be sure to understand any associated fees and/or penalties.

If you need support, or for an in-depth discussion, please call.

^{1. www.canada.ca/content/dam/fcac-acfc/documents/programs/research-surveys-studies-reports/financial-well-being-mortgages.pdf; 2. https://www150.statcan.gc.ca/ n1/daily-quotidien/240814/dq240814d-eng.htm; 3. Canadian Mortgage & Housing Corporation, Stats Canada T: 34-10-0145-01.}

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