Will Mortgage Rates and Borrowing Costs Rise?

More than one million mortgages are coming up for renewal in Canada this year, and a new survey shows most homeowners expect their monthly payments to rise.

A Royal LePage survey, released Thursday and conducted by Hill & Knowlton, finds 57% of Canadians who will renew a mortgage on their primary residence this year expect an increase in their monthly payment. That group includes 22% who anticipate a “significant” rise and 35% who expect a “slight” increase. About one-quarter believe their monthly payment will stay roughly the same, while 15% expect payments to decrease at renewal.

Still waiting for the effects of COVID to pass

Royal LePage estimates about 1.2 million mortgages will be up for renewal in 2025. Roughly 85% of those loans were signed when the Bank of Canada’s key policy rate was at or below 1% during the COVID‑19 pandemic—one of the lowest rate environments in modern history.

“We’re now five years from when those mortgages first became available so we’re getting those rolling over,” Royal LePage president and CEO Phil Soper said in an interview. “While rates have been coming down rapidly, they’re still well above what those super low pandemic mortgages were and people are concerned.”

What to expect for mortgage payments in 2025

Of the homeowners expecting higher monthly payments, 81% said the increase would create financial strain for their household. Many plan to cut discretionary spending—fewer restaurant visits, less entertainment and reduced travel—to absorb higher mortgage costs. About 10% of respondents said they are considering more radical adjustments such as downsizing, relocating to a more affordable region or renting out part of their home to offset rising borrowing costs.

Soper also pointed to geopolitical and trade uncertainties as added sources of anxiety. He noted concerns about a potential trade dispute with the U.S. and the economic disruption that could follow from proposed tariffs. Still, he suggested the Bank of Canada could respond to such economic pressure by easing monetary policy to support the economy.

“We’ll see rates dropping, and we potentially could see unemployment picking up,” Soper said. “We could see GDP trending downward, and at the same time because our industry is so rate sensitive, all that pent-up demand we have from the post-pandemic market correction … could be unleashed based on very low borrowing costs.”

Are Canadians opting for fixed or variable mortgages when renewing?

Most homeowners planning to renew intend to keep the same product type, but the survey shows growing interest in variable-rate options. Approximately two-thirds of those renewing this year say they plan to choose a fixed-rate loan at renewal, down from three-quarters who currently hold fixed-rate mortgages. Meanwhile, 29% expect to opt for variable-rate loans, up from 24% today.

In terms of term length, around 37% of respondents plan to take a five-year term when they renew, while 19% intend to select a three-year term.

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How much mortgage can you afford?

Knowing how much mortgage you can afford is essential when renewing. Use a mortgage payment calculator and compare fixed versus variable scenarios to understand short- and long-term costs, cash-flow impact and how changes in rates would affect your monthly payments.

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Choosing between a fixed and a variable rate mortgage

Soper noted that Canadians tend to favor five-year fixed-rate mortgages, but said that option isn’t always the optimal choice. If interest rates are clearly trending downward, locking in for a longer term may not make as much sense.

Last fall, Canada’s national banking regulator removed the requirement for a stress test when borrowers with uninsured mortgages switch providers—so long as amortization and loan amounts remain unchanged. That change can influence renewal decisions. Some households may find a shorter-term variable-rate mortgage more affordable in the long run if they can manage short-term payment risk and then lock in a lower rate later.

“You have got to be able to afford the shorter-term variable-rate mortgage, but if you can, it’s just making a lot of sense,” Soper said.

Read more about mortgages in Canada:

• Fixed or variable mortgage rate: Which should you choose?
• Tools to calculate your mortgage payments and costs in Canada
• Mortgage renewal calculator
• Renewing your mortgage? A guide for Canadians