Mortgage stress is growing in 2025 as interest rate hikes continue to squeeze Canadian homeowners. Following a series of rate increases by the Bank of Canada, the benchmark interest rate now sits at 2.75%, and experts expect it to remain unchanged throughout the year. This ongoing surge in borrowing costs has significantly impacted monthly mortgage payments, especially for those approaching renewal. Instead of relief, many Canadians are bracing for larger financial burdens. Whether you’re renewing a fixed-rate mortgage or navigating a variable-rate plan, the effects of these interest rate hikes are reshaping household budgets nationwide.
How Rising Interest Rates Are Changing the Mortgage Landscape in 2025
As homeowners across Canada grapple with these higher rates, it’s important to understand exactly how interest rate hikes are influencing mortgage affordability, payment structures, and renewal strategies in 2025. Let’s break down the key impacts and what you can do to stay financially prepared.
Mortgage Renewals in 2025 – Why Your Payments Are Going Up:
If your mortgage renewal is around the corner, brace yourself; 2025 is proving costly for Canadian homeowners. A recent report from the Bank of Canada reveals that nearly 60% of borrowers renewing between 2025 and 2026 will face higher monthly payments after locking in a new rate. This increase reflects the effects of ongoing interest rate hikes and elevated borrowing costs.
On average, mortgage payments are expected to rise by 10% for renewals in 2025, with a smaller, yet still notable, 6% increase projected for 2026. That’s in comparison to what these households were paying as of December 2024.
Need help estimating your new monthly cost? Try our Mortgage Renewal Calculator to see how much more you might pay.
Fixed vs. Variable Rate Mortgages – Who’s Hit Harder?
- Fixed-rate mortgage holders, especially those with five-year terms, are likely to see a 15–20% jump in their monthly payments when they renew in today’s high-rate environment. Learn more about this in our breakdown: Fixed vs Variable Mortgages in 2025.
- In contrast, some variable-rate mortgage borrowers could actually benefit from slight savings, potentially 5–7% lower payments, depending on their loan terms and lender flexibility.
Confused about which rate type to choose? Visit our Mortgage Rate Comparison Guide to weigh your options.
These shifts are making mortgage affordability a key concern for homeowners across Canada. Before signing your renewal deal, speak to a licensed expert. You can talk to a Mortgage Squad advisor for free, personalized guidance.
Why This Matters for Canadian Homeowners in 2025:
The impact of rising mortgage payments goes beyond just monthly bills, it can ripple through the entire economy. Here’s how:
- Reduced Consumer Spending: As more of your income is redirected toward housing costs, there’s less room in your budget for everyday essentials like groceries, dining, and entertainment. This cutback in household spending can slow overall economic growth.
- Increased Mortgage Stress & Financial Risk: With interest rates remaining high, many Canadians are feeling the pressure of mortgage stress. National regulators warn that this could heighten risks to Canada’s financial stability, especially as more borrowers approach renewal with higher debt loads.
➤ Read more: Canada’s mortgage system under pressure – Reuters
➤ Related insight: CTV News: Mortgage Renewals Creating Financial Headaches - Wider Economic Impact: The Bank of Canada and other central banks are closely monitoring the effect of elevated borrowing costs on inflation and economic health. Sustained high rates may cool inflation, but they also risk pulling down consumer activity and investment.
➤ Explore more: Bank of Canada Financial Stability Report
➤ Also see: MarketWatch on Interest Rate Trends
What’s Next for Interest Rates in Canada?
As Canadian homeowners look ahead, the big question remains: Will mortgage rates go down in 2025? Here’s what the leading forecasts suggest:
- TD Economics:
Analysts at TD Bank predict that the Bank of Canada’s policy rate could drop to 2.25% by mid-2025 if inflation continues to cool. - Scotiabank & CIBC Outlook:
Both banks expect rates to hold around 2.75% through 2025, with a gradual easing into 2026. - General Consensus:
Most experts agree: minor interest rate cuts may happen later in 2025 or early 2026, but major drops are unlikely in the short term.
What This Means for You?
If your mortgage is up for renewal in 2025, you’ll likely still face higher mortgage payments, especially if you’re moving from a lower fixed rate. Speak to a Mortgage Squad expert today to explore your options and lock in the best rate for your financial situation. Connect with an agent now.
What You Can Do to Prepare for Higher Mortgage Payments:
Take these smart steps to stay financially ready:
- Compare Mortgage Options:
Whether you’re on a variable rate or considering a fixed rate mortgage, explore both options to see which suits your current income and risk comfort. - Boost Your Budget Buffer:
Plan ahead by adjusting your monthly budget to absorb a 10–20% increase in mortgage costs. This cushion can help you stay stress-free. - Renew Early, Lock Smart:
Don’t wait until the last minute. Early mortgage renewal can sometimes secure a more favourable rate.
Every situation is unique. A licensed mortgage expert can help tailor a plan that fits your needs and timeline.
Final Verdict – Be Proactive in 2025:
If your mortgage renewal is due this year, expect your monthly payment to rise—typically by 10% or more, especially if you’re switching from a low fixed-rate mortgage. While variable-rate holders might see some relief, the reality is that rate cuts won’t come fast enough to offset the increases for most Canadians.The smartest approach? Plan early, compare your options, and lock in strategically. Staying informed and proactive can save you thousands over the life of your mortgage.