Mortgage Renewals in 2025 Set to Bring Payment Shocks for Borrowers
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Many Canadian homeowners will face a significant financial burden as mortgage renewals approach in the coming years. According to RBC, borrowers renewing their fixed-rate mortgages in 2025 are projected to see an average monthly payment increase of $513, or 22%.
Key Findings
Steep Payment Increases: Those renewing in 2025 will experience the highest payment shock due to previously low pandemic-era rates. Borrowers in 2026 and 2027 will also see notable increases of $458 (18%) and $291 (10%), respectively.
Delinquencies on the Rise: RBC’s mortgage arrears—loans overdue by 90 days or more—rose to 0.26% in Q4 2024, signaling financial strain on some borrowers.
Economic Challenges: RBC’s Chief Risk Officer anticipates these pressures will peak in mid-2025, as unemployment and economic conditions contribute to higher delinquency rates.
Amortization Periods Decline
On a positive note, the Bank of Canada’s recent rate cuts have shortened amortization periods. Mortgages with terms of 35+ years have disappeared from RBC’s portfolio, down from 18% last quarter.
This trend highlights how falling rates are enabling homeowners to pay down their principal faster, further reducing their amortization periods. RBC expects similar results at other major banks, which also utilize fixed-payment variable-rate mortgages.
Looking Ahead
While financial pressures are expected to persist into 2025, RBC highlights the resilience of many homeowners, aided by significant home equity.
For borrowers preparing for upcoming renewals, it’s critical to plan ahead and explore options to mitigate payment increases.
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