The state of mortgage renewals in Canada: Insights from CMHC

As we head toward 2025, the Canadian mortgage landscape is facing some big shifts. Interest rates are on the rise, borrower habits are changing, and more people are turning to real estate as an investment. For homeowners, especially those with mortgages up for renewal, these changes mean big decisions are on the horizon.

The latest Residential Mortgage Industry Report from the Canada Mortgage and Housing Corporation (CMHC) sheds light on these evolving dynamics. Whether you're a homeowner or just keeping a close eye on the market, this is what you need to know about mortgage renewals in Canada.

What is the current mortgage debt in Canada?

According to Statistics Canada, the residential mortgage debt rose 3.46% year over year in August 2024, reaching $2,212,126. This historically slow pace of growth is primarily influenced by high borrowing costs and elevated home prices, which have kept many potential homebuyers from entering the market.

Despite the slower growth, mortgage debt continues to outpace the current inflation rate of 1.6%. This shows that while affordability remains an issue, there’s still a steady demand for housing.

One reason for the slower pace in mortgage debt is the Bank of Canada’s four consecutive cuts, which kicked off this June. Although the overnight lending rate is down from 5% at the beginning of the year to 3.75%, many potential homebuyers are holding back, expecting interest rates to fall further before making a move.

How many mortgages are up for renewal in Canada?

In 2025, approximately 1.2 million fixed-rate mortgages will come up for renewal, representing over $300 billion in mortgage debt. In addition to this, the Bank of Canada reported that “virtually all” remaining mortgages will go through their renewal cycle by 2026. And here’s the challenge: a whopping majority of these mortgages were locked in when the Bank of Canada’s policy rate was at or below 1%. With the current rate sitting at 3.75%, many homeowners will face higher interest mortgage renewal rates. 

The CMHC estimates that homeowners renewing in 2025 could face monthly payment increases of 30-40%, adding about $15 billion per year in extra costs nationwide. This could reduce disposable income, impacting household budgets and broader spending.

On top of that, these higher renewal rates might make it harder for some homeowners to keep up with payments, which could lead to a rise in delinquency rates—cases where borrowers fall behind on their payments.

Why are mortgage renewals a concern for delinquency rates?

While still considered very low, the mortgage payment default rate in Canada has been on a steady rise, with delinquency increasing from a record low of 0.14% in 2022 to 0.19% in Q2 2024. Although it’s below the pre-pandemic average of 0.28% in 2019, this gradual uptick suggests mounting strain on household budgets. For homeowners facing mortgage renewals in 2025, the prospect of renewing at higher rates could exacerbate this trend.

Credit unions, mortgage finance companies, and other lenders have seen slight increases in delinquency rates on both insured and insured mortgages.

This increase in delinquency isn’t limited to mortgages. The CMHC report highlights rising delinquency rates across other credit products:

• Auto loans: Delinquency rates rose to 2.42% in Q2 2024, up from a period of stability.
• Credit cards: Delinquencies increased from 1.56% at the end of 2023 to 1.70% by mid-2024.
• Lines of credit: Delinquency rates on lines of credit rose from 0.72% to 0.84%.

Also read: How to pay down credit card debt with a personal loan

These trends point to increasing financial vulnerability within households, leaving less room in homeowners’ budgets to absorb the added costs of mortgage renewals. Anticipating higher potential defaults (when homeowners can no longer make their mortgage payments), banks have raised their allowances to cover potential future losses from 0.06% in Q2 2022 to 0.12% in Q2 2024. If delinquency rates continue to rise, the allowances could reach an estimated 0.27% by the end of 2024.

Also read: Mortgage renewal tips

Trends in borrower behavior as renewals approach

As the large wave of mortgage renewals in Canada draws closer, borrowers across Canada are making strategic choices to adapt to the evolving market conditions.

• Shift to shorter fixed-term mortgages: Homeowners are increasingly favoring shorter fixed-term mortgages, with terms of less than five years accounting for over 50% of all newly extended mortgages in July 2024. Many borrowers are choosing shorter terms as they anticipate further interest rate cuts, which could allow them to get lower mortgage renewal rates in the near future. 
• Decline in variable-rate mortgages: The share of newly extended variable-rate mortgages fell sharply to 9% in July 2024, down from 20% earlier in the year. This decline reflects the premium on variable rates that increased throughout the first half of 2024, pushing borrowers to opt for shorter fixed terms instead. Locking into a shorter fixed term provides more stability now while allowing flexibility when rates shift.
• Rise in popularity of investment/rental properties: Recent data shows a shift in the purpose of new mortgages, with more borrowers choosing to finance investment or rental properties rather than homes they plan to live in. Mortgages for owner-occupied properties have decreased from 75% in 2019 to 70% in Q3 of 2023, while investment properties are seeing a higher share. As more investors enter the market, competition may make it increasingly challenging for first-time buyers to enter the market. 

How to navigate the mortgage renewal process in 2025

If you’re one of the many homeowners whose current rate period is getting over in 2025, here are the top mortgage renewal tips:

• Start early and shop around. Begin researching your renewal options a few months before your current term expires. Even if your existing lender offers a renewal, it’s wise to compare rates and terms from other lenders. Recent policy changes, such as the elimination of the stress test requirement for borrowers switching lenders at renewal, will help you access lower rates from other lenders. 
• Explore refinancing options. Refinancing may help you adjust your mortgage to better suit your financial needs, such as extending your amortization to reduce monthly payments or consolidating debts. While mortgage refinance may come with costs, it can be worthwhile if it provides more manageable payments or better terms.

The bottom line

With a large number of upcoming mortgage renewals, paired with evolving market conditions, it's essential to stay sharp on your options. Whether it’s choosing a shorter term or exploring refinancing, proactive planning can put you in a stronger position when it’s time to renew. Be sure to consult with a financial advisor or mortgage expert to fully understand your options and secure the most favorable terms in this dynamic market.

Also read:

• Mortgage renewal process
• Early Mortgage Renewal
• Renewing your mortgage in 2024? Here’s what to expect
• Mortgage renewal denied