There’s been a lot of worry about Canadians facing a mortgage payment shock — the idea that when people renew their mortgages, their payments would skyrocket due to higher interest rates. But according to the latest report from the Bank of Canada, the situation isn’t as bad as expected.
Originally, it was predicted that mortgage payments would rise about 15% in 2024 which is significant for most households. However, new numbers from the Bank’s Financial Stability Report show that the average increase is actually much smaller — closer to 10%, and maybe even less going forward.
What changed?
Interest rates haven’t dropped dramatically, but they’ve settled lower than what was forecast last year. That’s taken some pressure off borrowers. In fact, some economists say the average mortgage payment has increased by about 4% – 5% less than expected.
Relatively speaking, that’s good news for homeowners — especially those renewing between now and 2026. Instead of being hit with a financial shock, many are seeing smaller-than-expected increases in their monthly payments.
Will mortgage rates go much lower?
Not likely — unless we hit another major crisis. Economists say most of the room for rate cuts has already been used. There might be a few more small cuts this year, but not enough to push rates back down to COVID lows.
And if we do see deeper cuts, it would probably mean something worse is going on — like a global trade war causing a more serious recession. In that case, lower rates wouldn’t necessarily help, because bigger economic problems would still affect jobs and household finances.
Bottom line:
The worst of the mortgage renewal shock seems to be behind us, and most homeowners are handling it better than expected. While we shouldn’t expect ultra-low rates to come back any time soon, the good news is that the anticipated payment shock will be more manageable than originally expected.
Wondering what your mortgage renewal will look like?
Let’s chat. I can help you understand your options, find your best terms, and build a plan that fits your budget.
