Did you get your mortgage in 2020? Pay close attention to your renewal date.

The Canadian housing market experienced an unprecedented boom in 2020, marked by record-breaking sales across the country. While this surge in real estate activity brought joy to homeowners and investors, it also set the stage for a potential payment shock for mortgage holders in the coming years. As we approach 2025, the consequences of those high sales volumes are beginning to manifest, leaving many Canadians concerned about their financial stability. In this blog post, we will explore the factors contributing to the payment shock phenomenon and discuss strategies for homeowners to navigate this challenging situation.

The 2020 Real Estate Boom:

In 2020, the Canadian housing market witnessed a remarkable surge in sales, driven by factors such as low-interest rates, increased demand for larger living spaces during the pandemic, and a desire for stable investments amidst economic uncertainty. These conditions prompted many people to enter the market and purchase properties. However, the aftermath of this buying spree is now becoming evident.

Payment Shock and Rising Interest Rates:

The Bank of Canada’s 2023 Financial System Review expresses growing concerns about households’ ability to service their debt, particularly mortgage holders who may face payment increases of up to 40% at renewal. The report emphasizes that as more mortgages are renewed in the coming years, financial pressure on households is expected to increase.


A significant contributing factor to payment shock is the potential rise in interest rates. While interest rates have remained historically low, the Bank of Canada and other financial institutions may begin to raise rates as the economy recovers and inflation concerns arise. This increase can significantly impact homeowners with adjustable-rate or variable-rate mortgages, resulting in higher monthly mortgage payments and potential financial strain.

Expected Payment Increases at Renewals:

According to the Bank of Canada, around one-third of mortgages have already seen payment increases compared to February 2022. By the end of 2026, all mortgage holders are expected to experience payment increases, depending on their mortgage type and previous rate.

For fixed-rate mortgages renewing in 2025-26, payments are projected to increase by 20% to 25%. Adjustable-rate borrowers have already witnessed increases of over 50%, while variable-rate mortgage borrowers with static monthly payments may need to increase payments by an average of 40% to maintain their original schedule, assuming renewal in 2025 or 2026.

Comparing Mortgage Payments:

To better understand the potential impact of payment shock, let’s compare the monthly mortgage payments for a $500,000 mortgage in 2020 at a fixed interest rate of 1.79% with a 5-year fixed, to a hypothetical 4.79% interest rate. As you can see below, there is an increase of nearly $800 (+27%). 


Mortgage Details

Interest Rate (Insured)

Monthly Payment

2020 Mortgage



2025 (Hypothetical)



*Please note that these figures are approximate and for illustrative purposes only. Actual mortgage payments may vary based on individual circumstances and market conditions. Rates are subject to change without notice.

How To Prepare For 2025:

Regular Mortgage Check-ups: Schedule regular check-ups with your mortgage broker or lender to stay informed about changes in the market and assess opportunities to optimize your mortgage. They can help you evaluate options such as prepayment privileges or adjusting your payment frequency to align with your financial goals.

Emergency Fund and Savings: Build and maintain an emergency fund to provide a buffer in case of unexpected financial challenges. Additionally, consider saving for future expenses or investment opportunities to enhance your financial resilience.

Debt Management: Evaluate your overall debt portfolio and explore strategies to manage and reduce high-interest debt. This may include debt consolidation, negotiating lower interest rates, or seeking professional debt counseling.

Maximize Home Equity: Regularly assess your home’s value and explore ways to increase equity, such as home improvements or renovations. Building equity can provide additional financial flexibility and options in the face of payment shock.

In conclusion, proactive financial planning is crucial for mortgage holders to mitigate the impact of payment shock. By reviewing mortgage agreements, implementing budgeting strategies, exploring refinancing options, seeking professional advice, and maximizing home equity, homeowners can navigate the challenges effectively. Engaging the services of a mortgage broker can provide valuable expertise and guidance throughout this process. With careful planning and informed decision-making, mortgage holders can safeguard their financial well-being and secure a stable future.

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