2025 Canadian Mortgage Renewal Squeeze: How Rising Payments Are Straining Canadian Households

In 2025, Canada’s housing market is facing a reckoning. As mortgage renewals loom for millions of homeowners, a significant portion of the population is bracing for higher monthly payments, with many fearing the financial strain will push their households to the brink.

According to a recent Royal LePage survey, six in ten Canadians renewing their mortgages this year expect their payments to increase, and half of those anticipate significant financial pressure. For one in ten, the burden is so severe that selling their home or downsizing has become a serious consideration.

This unfolding crisis is a legacy of the ultra-low interest rates that prevailed during the pandemic when many Canadians secured mortgages at historically low rates.

Now, as rates remain elevated despite recent declines, the financial shock of renewal is hitting hard. The Bank of Canada estimates that 60% of mortgages set to renew by 2026 will face higher rates, with 40% of all outstanding mortgages affected. While some homeowners have built equity and flexibility to manage the transition, others are being forced to make difficult choices, from cutting discretionary spending to rethinking their living arrangements.

The Renewal Wave: A Legacy of Pandemic-Era Borrowing

The roots of this crisis lie in the pandemic-era housing boom when the Bank of Canada slashed its key lending rate to 0.25% to stimulate the economy. This created a borrowing bonanza, with many Canadians locking in fixed-rate mortgages at rates below 2%. However, as inflation surged in 2022 and 2023, the central bank embarked on an aggressive tightening cycle, pushing its benchmark rate to a two-decade high of 5% by mid-2024. Although rates have since fallen by 2%, they remain well above the levels seen during the pandemic.

According to the Royal LePage survey, 57% of Canadians renewing their mortgages in 2025 expect higher monthly payments, with 22% anticipating a significant increase. For those who secured their mortgages at the peak of the low-rate environment, the payment shock is particularly acute. “Many Canadians have avoided the worst-case scenario of having to sell their homes, thanks to solid employment trends and declining interest rates,” says Phil Soper, president and CEO of Royal LePage. “Nevertheless, some will face a substantial rise in their mortgage costs, putting added pressure on their household finances.”

Financial Strain: Cutting Back to Stay Afloat

The survey reveals that 81% of those expecting higher payments anticipate financial strain, with 34% describing the strain as significant.

To cope, many homeowners are making tough choices. Sixty percent plan to reduce or eliminate discretionary spending, while 43% will cut back on travel and 36% will reduce or eliminate saving or investing. More alarmingly, 34% say they will reduce spending on essentials like groceries and gas, and 23% are considering taking on a second job or finding another source of income.

For some, these measures are not enough. One in ten respondents are considering more drastic steps, such as downsizing, relocating to a more affordable region, or renting out a portion of their home. In provinces like Alberta and Saskatchewan, where resource-based economies add income volatility, the strain is particularly pronounced.

Selling into the current weak market also has risks.

Regional Disparities: Quebec’s Resilience vs. Prairie Pressures

The impact of mortgage renewals varies significantly across the country. In Quebec, homeowners are the least likely to expect higher payments (51%) and the least likely to anticipate financial strain (73%). This resilience is attributed to stable employment, relatively affordable housing, and a cautious approach to borrowing.

In contrast, Prairie provinces like Saskatchewan and Manitoba are among the hardest hit, with 63% of homeowners expecting higher payments and 89% anticipating financial strain. Alberta, despite its higher average incomes, is also feeling the pinch, with 86% of respondents expecting strain. In Atlantic Canada, where 64% of homeowners expect higher payments—the highest proportion in the country—many are leveraging home equity to consolidate debt or add secondary units to offset costs.

The Shift to Variable Rates: A Gamble on Further Rate Cuts

As interest rates decline, more Canadians are considering variable-rate mortgages to reduce their monthly payments. According to the survey, 29% of respondents plan to switch to variable rates upon renewal, up from 24% currently holding them. This shift reflects optimism that the Bank of Canada will continue cutting rates in response to economic uncertainty, particularly amid escalating trade tensions with the United States.

However, this strategy is not without risks. Variable-rate mortgages expose borrowers to potential rate hikes, and 12% of such mortgages are currently in negative amortization, where payments fail to cover the interest, causing loan balances to grow. While this share is normalizing as rates decline, it underscores the precariousness of relying on variable rates in an uncertain economic climate.

A Test of Resilience in a Weak Market

The mortgage renewal wave of 2025 is a stress test for Canadian households and the broader economy. While many homeowners are adapting by tightening their budgets and exploring alternative financing options, others are being pushed to the brink. For policymakers, the challenge is to ensure that the transition does not lead to widespread financial distress or exacerbate existing inequalities in the housing market.