One of the most referred relationships we provide is the introduction to a qualified and trusted mortgage broker, specially in our turbulent time and wild housing market. The Canadian mortgage landscape is on the brink of a historic shift.
Over the next two years, a record number of homeowners are expected to renew their mortgages. This event will shape household budgets, market trends, and conversations between homebuyers and their mortgage brokers. Understanding what’s ahead can help you prepare for the challenges and opportunities this renewal wave brings.
Why are so many mortgages renewing?
Canada is about to experience the largest number of mortgage renewals ever within a two-year period. It’s estimated that 60% of all Canadian mortgages will come up for renewal in 2025 and 2026. This is unprecedented, and it’s the result of several key factors:
The peak year of 2021 for mortgages
In 2021, Canada saw a surge in home purchases and refinancings. Many buyers locked in five-year fixed rates at historically low levels. Some as low as 1.79%. Home prices also reached record highs, especially in Ontario and British Columbia.
Rising rates since 2022
After 2021, mortgage rates began to climb. Adjustable rates, which had been as low as 1.45%, rose to over 6.29%. Many buyers in 2022 and early 2023 opted for three-year terms, hoping that rates would decrease by the time they renewed.
The result? A huge cohort of homeowners who secured low rates in 2021 and short-term mortgages in 2022-2023 are now facing renewals at much higher rates.
The current renewal climate
For many, the renewal process in 2025 and 2026 will be a wake-up call. Homeowners who locked in at 1.79% are now seeing renewal offers closer to 4.29%. A significant jump. This change is especially challenging for those who purchased at the market’s peak and took on large mortgages.
It’s not just the mortgage payment that’s rising. Many households are also dealing with higher property taxes, increased insurance premiums, and the general rise in the cost of living, from groceries to utilities. For those whose incomes have remained flat, the pressure can feel intense.
Homeowners’ likely response
Despite the sticker shock, most mortgage holders are expected to renew their mortgages, even at higher rates. Historically, Canadians have shown resilience in the face of rising interest rates. Here’s what we can expect:
- Most will renew: The majority of homeowners will simply renew their mortgages, adjusting their budgets to accommodate higher payments.
- Some may sell or default: A smaller group, especially those with large mortgages and little financial flexibility, may find the new payments unmanageable. If they’ve built up enough equity, selling the home could be an option. In rare cases, some may face default or foreclosure.
- Coping strategies: In past periods of rising rates, most borrowers have found ways to cope, whether by tightening their budgets, extending amortization periods, or working with their mortgage broker to find the best possible renewal terms.
The economic squeeze
The challenge of higher mortgage payments is compounded by the broader economic environment. Living expenses continue to rise, and for many, wages have not kept pace with these increases. This means that even households that could once comfortably afford their mortgage may now feel squeezed.
- Stagnant incomes: For those who haven’t received raises or seen their income grow, the jump in mortgage payments can be especially daunting.
- Budget adjustments: Many families will need to revisit their budgets, cutting back on discretionary spending or finding new ways to save.
This is where the expertise of a mortgage broker becomes invaluable. Brokers can help homeowners explore all available options, from negotiating better rates to considering different mortgage products offered by lenders.
What does history tell us?
While the current renewal wave is unprecedented in size, it’s not the first time Canadians have faced higher rates at renewal. In previous cycles of rising interest rates, most borrowers have managed to adjust, and widespread defaults have been rare.
- Endurance and adaptation: The evidence suggests that, while the next few years may be challenging, most homeowners will endure the renewed payment situation. Some may need to make tough choices, but the majority will find ways to adapt.
- Support systems: Mortgage brokers play a crucial role in helping clients navigate these transitions, offering guidance, product comparisons, and support throughout the renewal process.
Practical steps approaching renewal
If your mortgage is coming up for renewal in 2025 or 2026, here are some steps to help you prepare:
- Start Early: Begin conversations with your mortgage broker well before your renewal date. This gives you time to explore your options and avoid last-minute decisions.
- Review Your Budget: Take a close look at your household finances. Factor in not just your new mortgage payment, but also rising costs for property taxes, insurance, and everyday expenses.
- Explore All Options: Your broker can help you compare different mortgage products, including those from Marathon Mortgage, to find the best fit for your situation. This might include considering adjustable or fixed rates, or extending your amortization to lower monthly payments.
- Don’t Panic: Remember, you’re not alone. Many Canadians are in the same boat, and there are solutions available. Your broker is there to help you navigate this transition.
The support of brokers
Mortgage brokers support their clients through this historic renewal period. By offering a range of flexible mortgage solutions, they help homeowners find the right fit for each of their unique needs.
Whether you’re looking for a product with flexible prepayment options, competitive rates, or features designed to help manage payment increases, your broker can help with their suite of solutions.
The bottom line
The next two years will be a defining period for many Canadian homeowners. While higher rates and rising costs present real challenges, history shows that most borrowers will adapt and endure. With the right advice and support from a mortgage broker, you can navigate your renewal with confidence and make informed decisions for your financial future.
If you’re approaching renewal, reach out to your mortgage broker to discuss your options and learn how they can help support your journey. If you are not aligned with a mortgage broker, reach out to us and we can introduce you to one that meets your needs. Trusted relationships are all about Keeping Life Current.
