IN THE NEWS

TORONTO, October 26, 2023 – According to a recent Royal LePage survey conducted by Nanos,[1] 74 per cent of Canadians with a residential mortgage set to renew within the next 18 months say they are concerned about the renewal, in light of the series of interest rate hikes made by the Bank of Canada since March of 2022. Thirty-one per cent of all mortgagees in Canada say their lending agreement is set to renew within the next year and a half (16% within 12 months and 15% in 12-18 months). That means 3.4 million Canadians have a mortgage that is set to renew by March of 2025.[2]

When asked about their impending mortgage renewals, many Canadians say they are considering changing the type of mortgage product they sign or increasing the amortization period, along with an array of cost-cutting measures. Twenty-four per cent of residential mortgage holders who are concerned about their renewal say they have considered extending their mortgage’s amortization period, while 23 per cent have contemplated switching to another lender in order to secure a better rate. If switching lenders, however, applicants with uninsured mortgages must qualify for the stress test, which is the higher of 5.25 per cent or the lending rate plus two per cent. This additional challenge may cause some borrowers to renew with their current lender at a higher rate in order to avoid the stress test.

Eighteen per cent of mortgage holders have thought about extending their next mortgage term, and 17 per cent have considered selling their home and buying a smaller property in order to reduce the size of their mortgage. Respondents were able to select more than one answer. Among those who currently hold a variable-rate or hybrid mortgage and reported feeling concerned, 40 per cent say they plan to switch to a fixed-rate mortgage upon renewal.

“Some Canadians with variable-rate mortgages have seen their monthly payments double or even triple over the last year and half, due to the Bank of Canada’s aggressive interest rate hike campaign aimed at tamping down high inflation. Those locked in to a fixed-rate mortgage, which most are, have been protected from those increases, at least for a short time,” said Karen Yolevski, chief operating officer, Royal LePage Real Estate Services Ltd. “While the central bank’s key lending rate is expected to come down in the medium term, the likelihood that we will return to rock-bottom rates of less than one per cent is very low. Upon renewal, fixed-rate mortgage holders will be faced with a new reality – higher monthly payments.”

Thirty per cent of Canadian mortgage holders say that they are not concerned about their upcoming renewal. More than half of them (55%) say they are confident that their income will allow them to absorb the higher interest rate, and another 33 per cent say they are close to paying off the remainder of their mortgage.