Nearly half of the active mortgages in Canada are set for renewal in the next two years, a scenario that could grow complex despite the prospect of upcoming interest rate cuts. The current situation hints at a significant increase in monthly expenses for many borrowers.

Mortgage Rates Context

While the Bank of Canada may start to reduce rates this year, interest rates are still higher than those seen before and during the pandemic. This means that even if rates fall, mortgage renewals could still result in higher monthly payments for borrowers.

Impact on Monthly Payments

Considering an example of a $400,000 mortgage taken out during the pandemic at a 2.5% rate, the current monthly payments are approximately $1792. Upon renewal, if the rates reach 5%, the new monthly payments would increase to $2266, amounting to an increase of $474 per month.

Debt Management and Advice

Experts recommend various strategies to manage increased costs, such as debt consolidation or extending the amortization period. Since each situation is unique, consulting with a professional for personalized advice is advised.

Outlook and Solutions

Financial institutions are proactive in helping clients find tailored solutions to avoid defaults. The anticipated reduction in rates could offer relief, but the timing and extent of this reduction remain uncertain.