A Ratehub.ca study shows how homeowners could be impacted by the renewal wave
A significant portion of Canadian mortgage holders – particularly those with five-year fixed-rate terms – are bracing for increased monthly payments as their mortgages come up for renewal in 2025 and 2026, a new Ratehub.ca report showed.
Recent data from the Bank of Canada, detailed in its July 2025 Staff Analytical Note 2025-21, indicates that approximately 60% of outstanding mortgages are set to renew within this period. The report, authored by Claudia Godbout, Adam Su, and Yang Xu, suggests that about 60% of these renewing mortgage holders will experience a payment increase, with most holding five-year fixed-rate mortgages.
Compared with December 2024 payments, the average monthly mortgage payment could be 10% higher for those renewing in 2025 and 6% higher for those renewing in 2026, according to the Bank of Canada’s analysis. For instance, mortgage holders with a five-year, fixed-rate contract renewing in 2025 or 2026 could face an average payment increase of around 15%-20% compared with their payment in December 2024. Conversely, borrowers with variable-rate, variable-payment mortgages might see an average payment decline of approximately 5%-7%.
Different scenarios for borrowers
Further insights from Ratehub.ca support those findings, providing specific scenarios for homeowners. According to their calculations, a homeowner renewing a five-year fixed mortgage could see a 19% increase in payments. For example, a homeowner who secured a five-year fixed rate of 1.89% in July 2020 on a $571,500 home would have paid $2,217 monthly. Upon renewing in July 2025 at a 3.84% rate, their new monthly payment would jump to $2,641, an increase of $424 per month, or $5,088 annually.
In contrast, borrowers renewing a five-year variable rate could experience a 2% decrease. A homeowner with a five-year variable rate of 1.70% in July 2020, paying $2,171 monthly, might see their payment increase to $2,844 by July 2025 due to rate fluctuations during their term. However, upon renewing at today’s best five-year variable rate of 3.95%, their new monthly payment would be $2,775, resulting in a $69 monthly decrease, or $828 annually.
Penelope Graham, a mortgage expert at Ratehub.ca, emphasized the importance of exploring various mortgage options. “Paying nearly $5,100 more on the mortgage annually is a considerable stretch for many Canadian households,” Graham stated.
She advised borrowers to shop around for better rates, noting that lenders often offer more attractive rates to new clients. Graham also suggested extending mortgage amortization to lower monthly payments, though this would result in more interest paid over the loan’s lifetime. For those concerned about payments, Graham advised to communicate with lenders early for finding solutions, including temporary payment deferrals.
The decision between fixed and variable rates depends on a borrower’s risk tolerance. While the Bank of Canada’s overnight lending rate has seen cuts since June 2024, variable rates have remained higher than fixed rates during this period. Graham highlighted the current upward pressure on fixed mortgage rates due to rising bond yields, urging borrowers to secure a rate hold or pre-approval to lock in lower interest rates.
What steps should borrowers take to prepare for their mortgage renewal? Share your insights in the comments below.
