Experts weigh in on the current climate
Canadian homeowners renewing five-year mortgages this year face a 15% increase in monthly payments amid shifting market trends, according to new data from Ratehub.ca.
The financial comparison site reports a significant drop in new home purchase inquiries, accounting for just 47% of mortgage rate searches compared to 71% during the same period last year. Meanwhile, renewal inquiries have climbed to 39% from 22% in 2024.
“Fewer Canadians are looking to purchase a home amid a rocky economic climate,” said Penelope Graham, mortgage expert at Ratehub.ca. “Meanwhile, the number of mortgage terms coming up for renewal has increased; given today’s interest rates are considerably higher than in 2020, borrowers are especially rate motivated.”
Borrowers face payment increases
According to the Bank of Canada’s 2025 Financial Stability Report, 60% of all outstanding mortgages in Canada will renew this year and next, with most facing payment increases due to higher interest rates.
The impact is significant: a homeowner who purchased a $488,000 home in April 2020 with a 10% down payment and a five-year fixed rate of 2.14% would have paid $1,948 monthly. Upon renewal in April 2025, with a mortgage balance of $380,438 and a new rate of 3.74%, payments increase to $2,248 – an additional $300 per month or $3,600 annually.
National home sales have declined dramatically, reaching a 16-year low in March amid what Ratehub.ca describes as “tariff-induced economic uncertainty and growing fears of a recession.”
Other notable trends include:
- Variable-rate mortgage inquiries rose slightly to 8% from 5% last year, influenced by the Bank of Canada’s rate cutting cycle that began in June 2024, lowering rates by 225 basis points
- Fixed rates remain dominant but decreased to 77% of inquiries from 83% in 2024
- Three-year fixed-term inquiries increased to 12% from 7%, reflecting borrower preference for flexibility
- Refinance inquiries doubled to 12% from 6%, as homeowners seek relief from financial pressures
“This renewal wave is expected to accelerate in the coming months; while national home sales slumped in April 2020 due to the initial shock of COVID, transactions rapidly picked up in May and June of that year, many of which are now coming to the end of their five-year terms,” noted Graham.
Despite interest rates easing from the 5.49% peak reached in October 2023, today’s lowest five-year fixed mortgage rate of 3.84% remains 170 basis points above the 2.14% available in May 2020.
What are your thoughts on how a cooling housing market will affect homeowners? Share your insights in the comments below.
