Ongoing economic volatility and financial strain are seeing plenty of renewing mortgagors choose fixed options
Canada’s much-discussed mortgage renewal wave is well underway, with scores of pandemic-era mortgages renewing this year and next – often at significantly higher rates than borrowers enjoyed in 2020 and 2021.
The majority of homeowners renewing hold five-year, fixed-rate mortgages, according to the Bank of Canada, and are expected to be able to weather the impact of higher payments looking ahead.
A “severe worsening of financial stress for affected borrowers” is unlikely, the central bank said in an analysis this year, because most are likely to see interest rates below what they were stress-tested for during the pandemic and many have higher income than they did five years ago.
And fixed-rate mortgages – whether for five years or around three – remain a popular option for borrowers at renewal time, according to Ottawa broker Chris Allard (pictured top) of Smart Debt Mortgages, because of the peace of mind they currently offer compared to variable rates.
The fact that those rates don’t move up or down in tandem with volatile bond yields for the duration of the mortgage, he said, means borrowers are often currently choosing them over unpredictable variable options.
“Specific to Ottawa, we need to remember that many of our clients have full-time salaried roles with no opportunity or limited opportunity for bonus or overtime income,” Allard told Canadian Mortgage Professional. “And what I’ve found is that many borrowers have been wanting to stick with the fixed-rate option.
“Given that they’re salaried employees with no income fluctuation, the thought of payment [changes] can be daunting and with the cost of living, we’re often hearing that they’re putting a little bit less money aside than they’d like to. And so if they can control one thing, it’s within their budget. They want to make sure that their payment’s stable.”
Despite trade tensions and rate uncertainty, RBC notes little change in the economic outlook while PHL Capital’s Aaron Duhra points to “cautious optimism” as buyers turn to alternative lending.
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Many borrowers prefer stability, consistency of fixed rates
That’s not to say there’s currently a massive gap between fixed and variable rates. Depending on the lender, variable options are usually priced similarly to fixed rates and fall within the same range.
But the national economy continues to face a high degree of uncertainty because of ongoing trade tensions with the United States and other reports suggest Canadians are increasingly concerned about their own personal finances.
A TransUnion study for 2025’s second quarter showed that more than one in four Canadians (27%) are unable to pay all their bills and loans in full, with 96% remaining worried about inflation and more than half (51%) citing a recession as one of their top three financial concerns in the months ahead.
Meanwhile, the latest MNP Consumer Debt Index showed nearly two-thirds of Canadians say they need interest rates to fall for their finances to improve, while 36% say they’re feeling stressed or anxious about their finances.
Allard said the choice between fixed and variable rates when renewing depends on the client – and that borrowers who are confident in Bank of Canada rate cuts between now and the end of the year might still opt for variable rates.
“But by and large in my clientele, even if they think there’s opportunity to save with the variable, they’re kind of going: ‘You know what, I need some stability,’” he said.
Concerns over job cuts fuel Ottawa borrowers’ fixed-rate preference
In the Ottawa market, that concern has also been driven in part by a comprehensive spending review launched by prime minister Mark Carney aimed at reducing public sector fat through “ambitious savings proposals.”
The directive, which calls for program spending reductions of 7.5% in the upcoming fiscal year followed by a 10% cut next year and 15% by 2028-29, has sparked some concern among federal workers that their jobs could be on the line.
“It’s not clear if there’s going to be some job losses in Ottawa with the federal government cuts,” Allard said. “It sounds like there are some cuts looming and that could impact a lot of their borrowers. So they’re just saying, ‘We’re not in a period where we should take on any risk regardless of what opportunity we might have.’”
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