Over one million homeowners set to renew their mortgages in 2025 are expected to face substantially higher interest rates, with approximately 85 percent of these fixed-rate loans originating when the Bank of Canada’s rate was 1 percent or lower, according to a recent report from the Canada Mortgage and Housing Corporation (CMHC).
The report highlights that a significant number of fixed-rate mortgages—1.2 million in 2025 and 980,000 in 2026—will soon be up for renewal. For many, these rates will be notably higher than at the start of their loan term, as at least 1.05 million of these mortgages were signed during an era of exceptionally low rates. Currently, the Bank of Canada's rate stands at 3.75 percent.
Economist predict that this renewal wave could increase home listings as financially strained homeowners may choose to sell their properties.
"In late 2024 and early 2025, we expect a noticeable rise in resale listings, outpacing demand growth," said Michael Davenport, an economist at Oxford Economics. "As rates decline and mortgage regulations ease, we’ll likely see a strong boost in housing demand by mid-2025."
In the private lending sector, higher defaults and foreclosures have already led to more distressed property sales, as private loans often have higher interest rates and fewer regulatory protections. The CMHC report reveals that alternative lenders saw an increase in risk in the second quarter of 2024, with the 60-day delinquency rate for single-family homes reaching 5 percent, up from 1.7 percent in late 2022, and foreclosures rising from 1.3 to 3.5 percent over the same period.
For those facing renewals, however, there is some relief. Since June, the Bank of Canada has cut interest rates, currently at 3.75 percent after a series of four reductions from a peak of 5 percent. Another rate cut is anticipated by year’s end, potentially easing mortgage payments for many in 2025.
Without this rapid rate-cutting response, Davenport noted, there could have been a sharper rise in defaults, which might have tipped the economy into a deeper recession.
Source: Toronto Star