Current mortgage renewal rates are substantially higher than they were five years ago, despite recent Bank of Canada rate cuts. Homeowners who secured mortgages during the ultra-low interest rate environment of 2020-2021 may experience sticker shock in their mortgage renewal process. With approximately 1.2 million mortgages in Canada set to renew in 2025, representing over $300 billion in mortgage debt, many Canadians will need to reconsider their financial plans and housing strategies.

Canada’s Mortgage Renewal Environment for 2025

As we move through 2025, mortgage rates remain higher than they were when many homeowners last renewed or obtained their mortgages. Despite the Bank of Canada implementing several rate cuts since June 2024, rates haven’t returned to the record lows seen in 2020-2021. Most financial analysts predict a gradual downward trend in rates through 2025, but homeowners should still prepare for renewal rates that exceed what they secured five years ago.

The sheer volume of mortgages facing renewal in 2025 is unprecedented, stemming from the record number of home purchases and refinances that occurred during the pandemic’s ultra-low rate environment. The concentration of renewals creates both market pressure and opportunity. On the one hand, lenders are competing for this substantial business, which can benefit consumers with good credit profiles. On the other hand, the high volume may impact service levels and processing times at financial institutions.

Fixed vs. Variable Mortgage Rate Options for 2025

Recent surveys indicate a clear preference among homeowners facing 2025 mortgage renewal in Canada. Approximately 67% plan to renew with fixed-rate mortgages, while 29% lean toward variable rates. This represents a shift from previous years, reflecting changing risk appetites in response to recent rate volatility.

This preference for fixed rates is understandable, given the uncertainty many homeowners experienced during the rapid increases between 2022 and 2023. Having weathered that storm, many are prioritizing payment stability even if it means potentially paying a premium over variable rates.

Fixed-Rate Mortgages in 2025

Fixed-rate mortgages continue to offer predictability and security, attributes many homeowners value highly after experiencing significant rate fluctuations. With a fixed rate, your payment remains constant throughout your term, making budgeting more straightforward and protecting against future rate increases.

The premium for this security is viewed by many as worthwhile insurance against future economic uncertainty. Current mortgage renewal rates for 5-year fixed terms range between 4% and 5% at major financial institutions, though better deals may be available through mortgage brokers or with negotiation.

For homeowners who anticipate holding their property for the full term and value payment stability above all else, fixed rates remain an attractive option despite their higher initial cost.

Variable-Rate Mortgages in 2025

While selected by a smaller percentage of homeowners, variable-rate mortgages offer compelling advantages in the current environment. With the Bank of Canada cutting rates by 200 basis points since June 2024, variable rates have decreased accordingly, creating potential savings for homeowners willing to accept some uncertainty.

Several factors make variable rates worth considering for 2025 mortgage renewal in Canada:

• Variable rates currently sit approximately 0.75% to 1.25% below fixed rates, creating immediate monthly savings.
• Most economic forecasts suggest a continued downward trend in interest rates through 2025 and into 2026, potentially increasing the savings gap between variable and fixed options.
• Most variable mortgages allow conversion to fixed rates at any time, creating a one-way option that can be valuable if rates unexpectedly rise.
• Variable-rate mortgages typically have more favourable prepayment penalties (usually three months’ interest) than fixed-rate options, which can be significant if you break your mortgage before the term ends.

Strategies for Renewing Your Mortgage in 2025

Approaching your mortgage renewal strategically can save you thousands of dollars over your next term. Here are some practical approaches to help you secure the best possible outcome when renewing your mortgage in 2025:

• Begin your mortgage renewal preparations 4-6 months before your term expires to research rates, improve your credit if needed, and avoid being rushed into accepting your current lender’s first offer.
• Create competition for your business by consulting with mortgage brokers, approaching multiple financial institutions, and using online comparison tools.
• Use competitive offers from other lenders when speaking with your current institution, and don’t forget to negotiate beyond just the rate, including prepayment privileges, payment flexibility, and fees.
• With forecasts suggesting continued rate decreases, consider a shorter term length. 2 or 3-year terms currently offer lower rates than 5-year options and provide more frequent opportunities to reassess the market.
• If possible, make a principal prepayment before renewal to reduce your mortgage balance, potentially improve your loan-to-value ratio, and save thousands in interest over the life of your mortgage.
• Review your mortgage features, not just the rate. Evaluate prepayment privileges, payment frequency options, portability features, and conversion options, as these features can provide value that may outweigh a slightly lower rate elsewhere.
• Consider extending your amortization. This can reduce monthly payment amounts and free up cash flow for other financial priorities if higher payments are creating budget pressure.
• Work to improve your credit score 6 months before renewal by paying down credit card balances and making all payments on time, as even a 20-30 point improvement can qualify you for better rates.

What Happens If Your Mortgage Renewal is Denied

While most homeowners sail through the mortgage renewal process without issues, a concerning number of Canadians face renewal challenges in 2025’s higher interest rate environment. If conventional mortgage renewal options remain closed, a couple of alternatives exist:

• B-Lender or alternative lenders work with borrowers who don’t meet traditional banking criteria. While their rates are typically a little higher than prime lenders, they offer a viable bridge solution until you can qualify for conventional financing again.
• As a last resort, private mortgage lenders can provide solutions when all other options fail. These lenders focus primarily on your property’s equity rather than your income or credit, but charge significantly higher interest rates and substantial fees.
• Family members with strong credit and income may be willing to co-sign your mortgage temporarily or provide financial assistance to reduce your loan amount to a more favourable loan-to-value ratio.

For some homeowners facing challenges with their 2025 mortgage renewal in Canada, selling their property and moving to a more affordable one might be the most financially prudent option. SLG Home Buyer purchases homes directly from owners throughout Ontario, providing a stress-free alternative to traditional selling. If the prospect of mortgage renewal has you considering your options, contact SLG Home Buyer for a no-obligation cash offer on your property.