Will the cost of borrowing and mortgage payments rise?

A Royal LePage survey released Thursday, conducted by Hill & Knowlton, said 57% of Canadians set to renew a mortgage on their primary residence this year expect their monthly payment to increase. That includes 22% who expect it to rise “significantly” and 35% who think their payment will go up “slightly.” One-quarter said their monthly mortgage payment will remain about the same and 15% expect it to decrease upon renewal. 

Still waiting for the effects of COVID to pass

Royal LePage said 1.2 million mortgages are up for renewal in 2025. Around 85% of those were secured when the Bank of Canada’s key policy rate sunk to historically low levels—at or below 1%—during the COVID-19 pandemic.

“We’re now five years from when those mortgages first became available so we’re getting those rolling over,” said Royal LePage president and CEO Phil Soper in an interview. “While rates have been coming down rapidly, they’re still well above what those super low pandemic mortgages were and people are concerned.”

What to expect for mortgage payments in 2025

Among those who expect their monthly payment to rise, 81% said the increase would put financial strain on their household. Many of those said they will reduce discretionary spending such as on restaurants and entertainment, or cut back on travel to help cope with the increased costs. Meanwhile, 10% of respondents said they are considering downsizing, relocating to a more affordable region or renting out a portion of their home in response to higher borrowing costs.

Soper said a potential trade war with the U.S., and the harm the Canadian economy could endure from President Donald Trump’s threat of 25% tariffs, is adding to Canadian homeowners’ anxiety. However, he said the Bank of Canada could loosen monetary policy in response to tariffs in order to ease the burden on the economy.

“We’ll see rates dropping, and we potentially could see unemployment picking up,” he said. “We could see GDP trending downward, and at the same time because our industry is so rate sensitive, all that pent-up demand we have from the post-pandemic market correction … could be unleashed based on very low borrowing costs.”

Are Canadians opting for fixed or variable mortgages when renewing?

While most households with pending renewals plan to maintain the same type of mortgage product they have, the report said more Canadians are exploring the option of signing variable-rate mortgages. Around two-thirds of respondents with a mortgage renewing this year said they plan to obtain a fixed-rate loan upon renewal, down from the three-quarters who currently have fixed-rate mortgages.

Around 29% said they will choose a variable-rate loan, up from the 24% who currently have variable-rate mortgages. Around 37% of all respondents said they plan to go with a five-year mortgage term upon renewal, while 19% intend to sign on to a three-year term.

How much mortgage can you afford?

You can also check this table to compare fixed versus variable mortgage rates in Canada right now.

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Choosing between a fixed and a variable rate mortgage

Soper said Canadians tend to gravitate toward 5-year fixed-rate mortgages, but that option “doesn’t always make sense.”

“If you’re in a period of clearly declining interest rates, as we have been for about a year now, it really doesn’t make a lot of logical sense to lock in for the longer term,” he said.

Last fall, Canada’s national banking regulator announced it would no longer require borrowers with uninsured mortgages to undergo a stress test when switching providers, as long as the amortization schedule and loan amount remain unchanged. While a six-month variable-rate mortgage might be more expensive in the short-term, Soper said some households might believe that option will be more affordable down the road, since they could be able to lock in a lower interest rate in the future. 

“You have got to be able to afford the shorter-term variable-rate mortgage, but if you can, it’s just making a lot of sense,” he said.

Read more about mortgages in Canada:

• Fixed or variable mortgage rate: Which should you choose?
• Tools to calculate your mortgage payments and costs in Canada
• Mortgage renewal calculator
• Renewing your mortgage? A guide for Canadians

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