According to the Canadian Mortgage and Housing Corporation (CMHC), an estimated 1.2 million Canadian homeowners are set to renew their mortgages in 2025. This comes as many are navigating a shifting interest rate landscape, with the Bank of Canada’s key overnight lending rate now at 3.25% following a series of rate cuts that began in June 2024. While this rate is significantly lower than the 5% peak, many homeowners are still facing higher monthly payments compared to the historically low fixed rates they secured in 2020 and 2021.

For those renewing their mortgages, careful planning and strategic decision-making are critical to mitigating financial strain. Here are key considerations and actionable tips to help Canadians save money during this process.

Understand the Changing Rate Environment

The Bank of Canada’s rate cuts have brought relief to variable rate and adjustable rate mortgage holders, as well as those with home equity lines of credit tied to the prime lending rate. Meanwhile, fixed mortgage rates are influenced by Canadian bond yields, which have been trending lower recently. Despite this, fixed rates today are more than double the rates offered during the pandemic years, placing renewed pressure on homeowners.

For example, in British Columbia, where the average mortgage renewal amount is approximately $450,000, a homeowner renewing from a 2% fixed rate to a 5% rate could see their monthly payment increase by several hundred dollars. It is essential to prepare for these changes by exploring ways to reduce costs and improve cash flow.

Strategies to Save Money on Your Mortgage Renewal

1. Shop Around and Compare Rates
   Don’t settle for your current lender’s initial renewal offer. Compare rates from multiple lenders to ensure you’re getting the best deal. Consider reaching out to a mortgage broker who can help you evaluate rates and products from various lenders, including banks and credit unions. Once you find a competitive rate, ask your current lender to match or beat it.

2. Assess Your Mortgage Needs
   Renewal is an excellent time to reevaluate your financial goals and future plans. For example:

   • If you’re planning a move, consider an open or portable mortgage.

   • If renovations are in your future, a home equity line of credit might be worth exploring.

   • If you anticipate financial constraints, opting for a longer amortization could lower your monthly payments.

3. Make Lump-Sum Payments
   If you have savings or other financial resources, consider making a lump-sum payment to reduce your mortgage balance. This can significantly lower your monthly payments and total interest costs over the life of the loan.

4. Extend Your Amortization
   For those needing immediate relief, extending your amortization period—up to the original term minus the elapsed years—can lower monthly payments. This can be especially helpful for families managing multiple financial priorities.

Understanding Recent Mortgage Changes

Several recent reforms are poised to impact homeowners and buyers:

• Price Cap Increase for Insured Mortgages
  As of December 15, 2024, the price cap for insured mortgages rose from $1 million to $1.5 million. This change allows more Canadians to qualify for a mortgage with a down payment of less than 20% and provides access to a broader range of housing options.

• 30-Year Amortization for Select Borrowers
  First-time homebuyers and those purchasing new builds can now opt for a 30-year amortization, providing flexibility and reducing monthly payments.

• Elimination of Stress Test for Lender Switching
  Homeowners looking to switch lenders at renewal no longer need to undergo a stress test. This change promotes competition and makes it easier for borrowers to secure better rates.

Conclusion

Renewing a mortgage in 2025 presents unique challenges and opportunities. While higher payments are likely unavoidable for many, proactive measures such as shopping around, reassessing your mortgage product, and leveraging recent policy changes can help ease the burden. As the market evolves, staying informed and seeking professional advice will be key to making the best financial decisions for your future.