If your mortgage is up for renewal this year, you’re probably bracing for rates far above what you locked in during the pandemic era. Let’s clear up the facts and make sure you’re making smart decisions—with numbers that reflect today’s economic reality.
The Economic Backdrop: We’re Treading Water
Headline inflation in Canada is currently 1.9% year-over-year. But core inflation—the kind the Bank of Canada actually uses to guide rate decisions—is still sitting around 3%.
Immigration remains strong, but with productivity stagnating, tariffs ramping up south of the border, unemployment hovering just above 6%, and business investment still lagging, it all adds up to an economy that’s technically growing—but barely.
Translation: Even though we’re technically not in a recession and the headline inflation numbers look better, don’t count on any deep rate cuts. The Bank of Canada is laser-focused on core inflation, and it’s still too high for their liking.
Reality Check: Rate Shock Is Real
Let’s say you bought a $1.2 million home in Toronto in 2020, put 20% down, and locked in a five-year fixed rate mortgage at 1.5%. Your mortgage would’ve been around $960,000. Payments at that time? Roughly $3,775–$3,800/month.
Now? Renewing at 4.5% shoots your payment up to around $5,200–$5,250/month. That’s $1,400 more every month—just for keeping the same house.
Even if you snag a 4.0% rate, you’re still looking at payments of about $4,860/month. That’s nearly $350 more per month compared to 4.5%—or $4,200 per year. Every fraction of a percent matters.
Start Early (Like, Now)
Most lenders let you lock in a renewal rate 120 days before your term ends. That’s your window. Use it to shop around, compare rates, and see what kind of leverage you can get.
Pro Tip: A good mortgage broker can often find better deals than your bank is offering.
Don’t Sleepwalk into a Fixed Rate
Fixed rates feel safe—and sometimes, they are. But variable rates might still be lower, and they often come with lower penalties if you need to break your mortgage.
This isn’t about guessing the market. It’s about knowing your budget, your risk tolerance, and how long you plan to stay put.
The Right Term Matters Too
Five-year terms aren’t always the smartest play. Two or three-year mortgages are gaining popularity for good reason. They offer flexibility without locking you in during uncertain times. If rates drop in a year or two, you’re in a better position to pivot.
Negotiate Like It’s Your Job
You don’t necessarily have to renew your mortgage with the same lender.
As of late 2024, uninsured borrowers (those with at least 20% equity) no longer need to re-qualify under the stress test when switching lenders—as long as you’re not borrowing more or extending your amortization. This rule change makes it far easier to walk away from a bad renewal offer. You’re no longer stuck with your existing lender just because of qualifying hurdles. Start by checking rate comparison sites online to see what’s out there. Then talk to a mortgage broker who works with multiple lenders and understands the Toronto market.
That first renewal offer from your current lender? It’s rarely their best. Ask for a lower rate. Ask for flexible pre-payment options. Ask for cashback. Even if you stick with the same lender, coming to the table with other offers gives you real negotiating power.
Re-Evaluate Your Terms
Renewal time is the perfect time to rethink your mortgage strategy:
- Want lower monthly payments? Consider stretching the amortization.
- Have cash flow to spare? Shorten it and save on long-term interest.
- Carrying credit card debt? Consolidate it into your mortgage.
- Thinking of moving? Look into portable mortgage options.
Tailor your mortgage to your life—not the other way around.
Stuck? There Are Lifelines
If you’re feeling squeezed, don’t panic—but don’t freeze either. Explore your options:
- Ask your lender about hardship extensions or skip-a-payment features
- Use a HELOC for short-term breathing room
- Consider a reverse mortgage if you’re 55+
- Bring in a renter or consider downsizing
And no—don’t raid your RRSPs unless you’re staring down a default. That’s a last resort.
What Would It Take for Rates to Drop?
If you’re holding out for mortgage rates that start with a “2” again, here’s what needs to happen:
- Core inflation has to fall to the mid–2% range
- A serious economic downturn
- Or a global crisis
In past downturns, the Bank of Canada cut rates by 400 basis points. But the starting point was higher back then. Today, a 100-point drop would be considered big—saving about $4,600 over five years for every $100K owed.
Rate cuts could come—but not without pain. Don’t build your financial plan around wishful thinking.
Toronto Context: The Stakes Are Higher Here
If you’re renewing in the GTA, your pain is amplified. Bigger mortgage balances mean rate jumps hurt more. That $900,000 semi in Leslieville? A 3% rate difference might mean $1,000 more a month.
And it’s not like your condo fees or property taxes are getting cheaper.
The BREL Bottom Line
Renewing in 2025? Here’s what you need to do:
- Start early—don’t let your renewal sneak up.
- Shop aggressively—your lender’s first offer probably sucks.
- Weigh fixed vs variable based on your financial situation, not market noise.
- Don’t default to a five-year term—shorter terms might serve you better.
- Explore your restructuring options—amortization, consolidation, portability.
- Be realistic—rate cuts aren’t guaranteed.
You’ve built up equity. Let’s make sure you don’t lose it to a bad renewal. Make this next term work for you.
