The year 2025 will likely bring a financial challenge to holders of the 1.2 million fixed-rate mortgages that will have to be renewed across Canada. Of these, 85% were subscribed when the key rate was equal to or lower than 1%, whereas it is currently 3.75%.
Posted at 3:36 p.m.
“As a result, at least 1.05 million mortgage borrowers will need to renew their loans in 2025 at a significantly higher interest rate,” reads the Canadian Society’s latest Residential Mortgage Sector Report. Mortgage and Housing Services (CMHC).
The organization emphasizes that this phenomenon, coupled with high household debt, is “worrying” for the Canadian economy.
The rate of delinquent mortgage loans (more than 90 days) increased in the second quarter, although it remains low, at 0.192%. This is a slight increase from the first quarter, when it stood at 0.188%. Everything still remains below the pre-pandemic rate, which was 0.28%.
Two indicators suggest that the rate of delinquent mortgage loans will continue to increase: the rates of delinquent credit cards and auto loans have both increased, underlines the CMHC.
Another worrying data: the default mortgage rate increased by 3.5% year over year in July, an increase greater than inflation. “The rise in the cost of living and debt servicing costs has significantly changed household budgets over the past year. In this context, the already high household debt creates a situation of considerable vulnerability,” we read in the report.
Canadians believe in lower rates
Canadians who take out or renew a mortgage, however, seem confident that rates will fall, given that they favor fixed rates with a duration of more than 3 years, but less than 5 years. As of July 2024, these mortgages accounted for more than half of all newly originated mortgages by chartered banks.
In second place were fixed rates with a duration of more than 1 year, but less than 3 years. At the same time, fixed rates over a period of 5 years represented only 12% of these.
Variable rates are not very popular.
