The Real Impact of Interest Rates Doubling: What Canadian Homeowners Need to Know as Renewals Loom in 2025 & 2026
If you locked in a mortgage rate at 1.75% to 2.25% back in 2020 or 2021, you probably felt like you won the mortgage lottery. At that time, rock-bottom rates allowed homeowners to borrow more for less, and monthly payments felt manageable—even with higher home prices.
Fast forward to 2025, and things look very different. Interest rates have more than doubled. Many five-year fixed mortgages from the pandemic era are coming up for renewal this year, and for thousands of Canadians, the payment shock will be very real.
So, what does this actually mean in dollar terms? Let’s break it down.
The Math Behind the Mortgage Shock
Let’s take a typical example:
Original mortgage amount: $500,000
Term: 5 years
Amortization: 25 years
Rate in 2020: 2.00% fixed
Monthly payment (2020): ~$2,120
Now fast-forward to 2025.
New average rate: 4.34% fixed approximate (as of mid-2025)
Remaining balance: ~$426,000 after 5 years of payments
Remaining amortization: 20 years
New monthly payment: ~$2,650
That's a $530/month increase—or nearly 25% more.
What This Means for You
1. Your cash flow is about to tighten
For many families, an $530 increase in monthly expenses is significant—especially as other costs (groceries, gas, childcare) have risen too. Even those with above-average incomes may feel the pinch.
2. Stress tests don’t eliminate stress
Yes, the mortgage stress test is meant to ensure you could handle higher payments—but that doesn’t mean it’ll be easy. You may still need to cut discretionary spending, rework your budget, or even look at debt consolidation options.
3. Renewal isn’t automatic at the same rate
If your financial situation has changed—job loss, more debt, lower credit—you may not qualify for the best rates now. That’s why working with a mortgage broker matters more than ever.
What Can You Do About It?
✔️ Start planning early
If your mortgage is renewing in the next 6–12 months, don’t wait. Let’s review your financial picture and your options before your lender sends that renewal letter.
✔️ Consider extending your amortization
This isn’t right for everyone, but it can soften the blow by spreading payments over a longer period.
✔️ Explore refinancing or blending rates
Depending on your equity and goals, refinancing might make sense. You may be able to consolidate higher-interest debt or lock in a lower payment through a blended rate.
✔️ Don’t renew blindly with your bank
Lenders often offer posted rates that are significantly higher than what you could get elsewhere. As brokers, we shop around on your behalf—often accessing rates your bank won’t offer you directly.
Bottom Line
Rates have doubled—but that doesn’t mean your options have disappeared. The key is to act early, understand the numbers, and make a plan that keeps your household financially resilient.
You’re not alone in this. If your mortgage is up for renewal in 2025, let’s talk. We’ll walk through the numbers, discuss strategies, and help you come out of this transition stronger.