Bank of Canada Holds Rate Steady: What It Means for Your Mortgage
Homeowners across Canada were hoping for relief, but the Bank of Canada’s latest decision to keep its key interest rate at 2.75% offered little comfort. For those facing mortgage renewals this year, the unchanged rate means they’ll still be dealing with significantly higher monthly payments than they did five years ago—when interest rates were at historic lows. The pressure is mounting, especially for households in Ontario and British Columbia, where mortgage delinquencies are rising sharply.
Mortgage Renewal Shock Hits Canadian Households
Over 60% of Canadians will have to renew their mortgages in the next two years, and many are facing what economists have called a “renewal shock.” The average five-year fixed mortgage rate now sits between 4% and 4.5%—a steep increase from the sub-2% rates seen in 2020 and 2021. Even though interest rates have dropped from their 2023 peak, payments are still set to rise.
For instance, those renewing a five-year fixed mortgage could see their monthly payments jump by 15% to 20%. Meanwhile, those with variable-rate mortgages might see a slight dip of 5% to 7%, depending on how their contracts are structured.
Mounting Signs of Mortgage Stress
According to Robert Hogue, assistant chief economist at RBC, stress among mortgage holders is growing. Data from Equifax shows that Ontario’s mortgage delinquency rate rose 71.5% year over year in Q1, hitting 0.24%. British Columbia wasn’t far behind, with a 33% increase in the same period. A mortgage becomes “delinquent” when no payment is made for at least 90 days—and this trend could worsen as more renewals kick in.
Adding to the pressure, delinquency rates for credit cards and personal loans are now higher than pre-pandemic levels. Rising costs, paired with stagnant or declining job prospects, are making it difficult for many to keep up.
Homeowners Explore Refinancing, Debt Consolidation
Despite the challenges, some borrowers are managing to stay afloat. Meaghan Hastings, a veteran mortgage broker from Toronto, says clients are becoming more financially aware and are tightening their spending. Many are choosing to refinance or consolidate their debt into a single loan, aiming to reduce the overall monthly burden.
Ron Butler of Butler Mortgage echoes that sentiment. His firm is seeing a steady stream of renewals, and about a quarter of his clients are actively seeking strategies to ease their financial strain. Refinancing isn’t always the go-to solution, but it’s on the table for those who need more flexible repayment terms.
Federal Measures Aim to Ease the Burden
Recognizing the pressure on first-time buyers, the federal government recently relaxed mortgage rules. New buyers can now make smaller down payments and opt for longer amortization periods—up to 30 years—on insured mortgages. Previously, only those with a 20% down payment could access amortizations longer than 25 years.
This move could give new buyers a bit of breathing room, but for current homeowners facing renewal, the path forward remains financially tight.
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