With over a million mortgages set to renew this year in Canada, a recent survey reveals that a majority of homeowners are anticipating higher monthly borrowing costs. The Royal LePage survey, conducted by Hill & Knowlton, uncovered that 57% of Canadians preparing to renew their mortgage on their primary residence in 2025 are bracing for an increase in their monthly payments.
Here are some key points from the survey:
- 22% of respondents expect a significant rise in their monthly payment.
- 35% anticipate a slight increase.
- 25% believe their payment will remain unchanged.
- 15% are hopeful for a decrease in their monthly mortgage payment.
This significant number of impending renewals is a direct result of the economic impact of the COVID-19 pandemic. Many of these mortgages were secured when the Bank of Canada’s key policy rate was at historically low levels, below one percent. As these mortgages come up for renewal, homeowners are feeling the pinch of higher borrowing costs.
Phil Soper, the President and CEO of Royal LePage, highlighted the financial strain that an increase in monthly payments would put on households. Many families are already making plans to cut back on discretionary spending like dining out and entertainment, or even considering downsizing or renting out a part of their home to cope with rising costs.
The survey also revealed a shift in mortgage preferences:
- Two-thirds of respondents plan to opt for a fixed-rate mortgage upon renewal, a decrease from the current three-quarters.
- 29% are considering a variable-rate mortgage, up from the current 24%.
Soper warned that locking into a five-year fixed-rate mortgage may not be the most cost-effective option in a period of declining interest rates. He emphasized the importance of considering variable-rate mortgages, especially with the recent regulatory changes that eliminated stress tests for borrowers switching providers with unchanged loan details.
With a potential trade war looming and economic uncertainty on the horizon, Canadian homeowners are advised to carefully consider their mortgage options. Despite the challenges, there is hope that the Bank of Canada’s monetary policy adjustments could bring relief to homeowners facing increased borrowing costs.
As Canadian households navigate these financial waters, making informed decisions about mortgage renewals will be crucial for their financial stability in the coming years. It’s essential to explore all available options and consider the long-term implications of mortgage choices in these uncertain times.
