Somewhere between 1.15 million and 1.8 million Canadian mortgages come up for renewal in the twelve months around now, and a lot of them were signed at a rate that no longer exists.
Rates locked in through 2020 and 2021 sat as low as 1.3% to 1.9%. The Bank of Canada’s overnight rate now sits at 2.25%, unchanged for six straight announcements, with five-year fixed retail rates running in the mid four to low five percent range. Roughly 60% of homeowners renewing this year are facing higher payments as a result.
The arithmetic that lands all at once
On a typical five hundred thousand dollar mortgage, the jump from a pandemic-era rate to today’s rate can mean an extra $400 to $500 a month, arriving all at once on a renewal date nobody gets to negotiate away. There is no phase-in period. The new payment shows up on the statement the month the old term expires, whether the household’s income moved or not.
Nobody signed a bad rate
This is not a story about anyone making a poor decision. Every one of these homeowners signed the rate that was available at the time, the rate the Bank of Canada itself set to keep the economy moving through 2020 and 2021. The policy did what it was designed to do. The bill for that decision is landing on individual households five years later, on a schedule the household did not choose and could not plan around.
Fewer easy outs in Alberta
Alberta’s housing market has cooled enough since its peak that refinancing options are thinner than they were a couple of years ago. Homeowners who might once have pulled equity out to smooth over a renewal shock have less room to do that now. For a lot of Alberta households, the renewal notice is the first real signal that the rate environment changed, more than any news coverage of Bank of Canada decisions that came before it.
A rate built for a crisis was never permanent
A rate that made sense for a crisis in 2021 was never going to stay appropriate forever, and most homeowners understood that in the abstract. The renewal notice just makes the arithmetic personal, on a specific date, for a specific dollar amount, without much warning built into the process. Alberta’s own recovery has outpaced most provinces on jobs and population growth, but a mortgage renewal does not care what the provincial numbers say. It cares what the household’s income looked like on the day the papers were signed, and what it looks like now.
Is your mortgage up for renewal this year, and how much has the payment moved?
