Canadian Mortgage Renewal Crisis: 1.2 Million Homeowners Face Payment Shock in 2025

A perfect storm of expiring ultra-low COVID-era mortgages and renewed economic uncertainty is about to hit Canadian homeowners, with new data revealing 57% of renewing borrowers expect significant payment increases this year.

The Mortgage Renewal Cliff: By the Numbers

According to Royal LePage’s nationwide survey conducted by Hill & Knowlton:

• 1.2 million mortgages will renew in 2025
• 85% were originally secured at pandemic-era rates (≤1%)
• 22% anticipate “dramatic” payment increases
• 35% expect “moderate” hikes
• 81% of affected households report this will cause financial strain

Five years after rock-bottom rate mortgages were issued, borrowers are facing a harsh reality check,” said Phil Soper, Royal LePage CEO. Even with recent rate cuts, today’s rates remain substantially higher than 2020-2021 levels.

Household Budgets Under Siege

The survey reveals cascading economic effects:

• Discretionary spending cuts: 63% will reduce dining out/entertainment
• Travel reductions: 41% scaling back vacation plans
• Housing adjustments: 10% considering downsizing or relocation
• Rental solutions: 7% exploring basement suites or room rentals

The Trump Tariff Wild Card

Compounding the stress, 58% of respondents expressed anxiety about potential 25% U.S. tariffs—a policy threat that could:

• Force Bank of Canada rate cuts to stimulate exports
• Increase unemployment (currently 5.8%)
• Depress GDP growth projections

“Paradoxically, trade war fears might accelerate rate relief,” noted Soper. “This could unleash pent-up housing demand if borrowing costs drop sharply.”

Mortgage Product Shifts

Borrowers are reconsidering traditional preferences:

Five-year fixed mortgages aren’t always optimal,” cautioned Soper. “During rate decline cycles like we’re entering, shorter terms or variable products often save money long-term.”

Banking Sector Braces for Impact

Canada’s Big Six banks face dual pressures ahead of Q1 earnings:

Credit Risk Preparations

• Expected 15-20% increase in provisions for credit losses (PCLs)
• TD Bank analysts predict “material PCL builds” could overshadow strong NIM growth
• BMO and Scotiabank most exposed due to U.S./Mexico exposures

Regulatory Changes

• OSFI eliminated stress tests for uninsured mortgage transfers
• Average qualifying rate now 5.25% (vs. 7% in 2023)
• Banks increasing loss buffers for potential recession

“Credit deterioration hasn’t peaked,” warned CIBC’s Paul Holden, contradicting BMO’s earlier assessment. “Tariff risks may prolong the pain.”

Survival Strategies for Renewing Homeowners

Financial experts recommend:

1. Early renewal negotiations (6+ months before term end)
2. Blended rate options to smooth payment jumps
3. Amortization extensions where equity allows
4. Professional advice on product selection (fixed vs. variable)
5. Government relief programs like FHSA top-ups

As Soper concludes: “This isn’t 2008—Canadian households have more equity and lower debt ratios. But the adjustment will still hurt.”