Canada could see a wave of mortgage renewals in 2025. Here is how some homeowners plan to navigate the payment shock.

“We have no idea how we will afford an increase.”

That’s what Alecia, a Horseshoe Valley, Ont. resident, said when asked about renegotiating her mortgage in 2025 and the expected rise in costs.

“It’s not just the mortgage, it’s the property tax and all other expenses that are of concern,” she told CTV News Toronto.

The 63-year-old property owner is one of 1.2 million Canadians facing a mortgage renewal in 2025, according to a report released by the Canadian Mortgage and Housing Corporation (CMHC).

At least 85 per cent of those existing home loans were contracted when the Bank of Canada’s interest rate was at or below one per cent, the report notes, which means more than one million homeowners will face “significantly higher interest rates” when they renew.

The payment shock for many Canadians will come even after the Bank of Canada cut interest rates by a total of 175 basis points since last spring. Interest rates had previously reached a 22-year high in an effort to curb inflation.

Alecia has a $1 million mortgage left on her primary residence and she admits that she’s unsure what type of rate she’s up against when she renews. She said she and her husband previously listed their property amid the rising costs of living in Canada and said they plan to move to Mexico.

“How do you survive? It's not feasible. Food’s too expensive. Insurance is too expensive. They're bleeding us dry. Like, what do you get, 40 per cent out of your pocket now?”

Maria, of Tottenham, Ont. is in a similar situation. The 61-year-old homeowner said she was paying off her $585,000 mortgage at a rate of 1.9 per cent. Now, she said she’s looking at rates of 3.99 per cent or higher and an increase of at least $700 per month to her payments.

“Well, it's going to be readjusting some things, of course, right?” She explained to CTV News. “We're looking at extending the amortization and going to monthly payments rather than the bi-weekly that we were making, which, of course, is going to extend our mortgage even longer, because we can't pay down what we were paying down.”

Mortgage arrears expected to increase: CMHC

Amid the increased payments for some Canadian homeowners, the CMHC says mortgage delinquencies are already ticking upwards and are expected to rise further in 2025.

"There's clear signs and for the last couple of years, but I would say increasingly so in the last year. And so we expect mortgage arrears to increase in the next year or so,” Tania Bourassa-Ochoa, CMHC Deputy Chief Economist, said in a interview with CTV News Toronto.

The mortgage delinquency rate across the country grew to 0.192 per cent in the second quarter of 2024 (representing roughly 13,000 households who are late on their payments by 90 days or more), up from 0.188 per cent in the first quarter. In 2022, the rate reached a record low of 0.14 per cent.

Looking specifically at Toronto, a supplementary analysis of the Canadian mortgage market found that the rate of mortgage arrears could reach levels unseen since 2012, according to the CMHC.

Other types of credit products are also seeing an increase in delinquency rates, Bourassa-Ochoa noted. Auto loans, which recorded a “significant” increase in arrears in Q2 of 2024, rose to 2.42 per cent, up from the range of 2.02 per cent and 2.11 per cent seen in the past two years. Meanwhile, the rates of credit card and line of credit arrears rose from 1.56 per cent to 1.70 per cent and from 0.72 per cent to 0.84 per cent, respectively.

On average, Bourassa-Ochoa says a Canadian homeowner renewing their mortgage this year can expect to see a roughly 30 per cent increase. And because Canadians generally prioritize mortgage payments above all other bills, those could be the last link in the chain to break when household spending becomes more constrained.

However, a tidal wave of mortgage defaults and home foreclosures is unlikely, Bourassa-Ochoa underscored.

“We anticipate that this pressure will be felt for sure, however, we're not anticipating that all of these borrowers will be going delinquent. On the contrary, you know, Canadians have shown a lot of resiliency, historically speaking, and so we expect to see that kind of resiliency,” she said.

Canada’s bank regulator previously said that homeowners in this country had managed the current credit cycle – which saw the Bank of Canada’s interest climb to five per cent and stay there for nearly a year – “quite well.”

“There is no evidence to suggest credit’s going to really deteriorate in a material way that might affect the broader economy or might affect the housing market,” Superintendent of Financial Institutions Peter Routledge said in October.

Moreover, in their own report, CIBC predicted that overall, mortgage payment “shock” will be felt at a micro level, instead of macro.

Renewing your mortgage and how to get the best deal

For the more than a million homeowners renewing their mortgage this year, getting the lowest rate on offer will be top of mind.

But how to you go about finding the best deal? CTV News Toronto spoke with Penelope Graham, head of content at Ratehub.ca, who said while banks will be “very competitive” in the New Year, it’s up to mortgage holders, or their brokers, to lock in the best rate.

“There's a lot of potential business that the banks want to grab, and they are planning to be quite aggressive with their pricing. We're going to start seeing them undercutting each other, trying to come up with the best possible mortgage rates,” Graham said.

According to Graham, banks generally reserve the most competitive rates for new clients, which means the onus will be on the person paying off the loan to do their research. She said the “biggest mistake” homeowners make when renewing their mortgages is signing whatever they get from their existing lender.

“And you can't blame them because lenders really do try to make this a painless and seamless experience. They send you that letter saying, ‘Hey, your mortgage is coming up for renewal. You just have to sign on the dotted line and you can set it and forget it,’” she said.

READ MORE: What to know about Canada's new mortgage rules, according to a broker

Doing your own market research, or working with a mortgage broker, is a good first step and will help homeowners understand if they really are getting the best deal with their current lender, or if lower rates are available elsewhere.

As for whether mortgage holders should opt for a fixed versus variable-rate home loan, Graham said it depends on how much you can stomach, as the former reacts heavily to the bond market and the latter is more reflexive to Bank of Canada interest rate announcements.

“That really comes down to risk tolerance. Yes, it seems quite likely that variable mortgage rates are going to trend lower over the course of 2025. Of course, we're fresh off of that most recent interest rate cut [on December 11]. The overnight lending rate is now down, it's a cumulative 175 basis points from June and we're now sitting at 3.25 per cent,” she said.

She noted that fixed-rate mortgage rates are “a lot harder” to forecast, and their rise and fall depends on many factors, including the potential of tariffs threatened by incoming president Donald Trump and rate cuts or increases by the U.S. Federal Reserve.

Editor’s note: CTV News agreed to only use the first names of the homeowners listed in this story for privacy reasons.