A surge in mortgage renewals across Canada is creating “payment shock” for homeowners, as higher interest rates sharply increase monthly payments compared to mortgages signed during the low-rate pandemic era. For homeowners renewing their mortgage in 2025, understanding what’s driving this shock and exploring strategies to ease financial stress is more important than ever.

What Is Payment Shock in Mortgage Renewals?

Payment shock occurs when homeowners face a sudden rise in mortgage payments at renewal due to higher interest rates. Those who secured ultra-low rates between 2020 and 2022 are most at risk. For instance, a $500,000 mortgage taken in 2020 at 1.8% ($2,100/month) may renew at 4.4%, increasing payments to $2,700 – a $600 jump each month.

Who Is Being Hit the Hardest?

Fixed-Rate Mortgage Holders: Homeowners with fixed-term loans from the pandemic era are seeing steep payment increases.

Variable-Rate Borrowers: Even those with “fixed payment” variable-rate mortgages may face monthly hikes up to 62% due to cumulative Bank of Canada rate increases.

By late 2026, an estimated 76% of outstanding mortgages will come up for renewal. The Bank of Canada projects that 60% of these will see higher payments, and in 2025 alone, more than 1.2 million Canadian mortgages will be affected, with payment jumps ranging from 20% to over 40%.

Why Is Payment Shock Happening Now?

Interest rates have surged, ending the era of ultra-low mortgage rates. Many homeowners did not anticipate how much rates would rise or how dramatically monthly payments would increase. Inflation, income stagnation, and rising living costs are adding to the pressure, intensifying the impact of renewals on household budgets.

The Real-World Impacts

Payment increases of $300–$600 per month are common, putting a strain on savings, daily expenses, and lifestyle choices. Financial stress is rising, with 70% of mortgage holders reporting anxiety about their renewals. Loan default and arrears risks are also growing, and reduced mortgage affordability can limit financial flexibility and the ability to tap into home equity.

Strategies to Ease Mortgage Renewal Payment Shock

Start Early: Begin renewal planning at least three months before your term ends.

Shop Around: Don’t automatically accept your lender’s offer; compare rates and negotiate better terms.

Revisit Budgets: Adjust your household budget and consider options like lump-sum payments or extending amortisation periods.

Consult Experts: Mortgage brokers like Cannect can guide you through refinancing, switching lenders, or exploring other solutions tailored to your situation.

Stress-Test Your Finances: Use online calculators or professional advice to ensure your budget can handle higher payments.

Move Forward with Confidence

Payment shock is a reality for millions of Canadians, but proactive planning and expert guidance can make a significant difference.

Cannect helps homeowners navigate mortgage renewals with clarity, offering flexible solutions and personalised support to minimise financial stress and protect your household budget.

📞 Call us today at 416-766-9000 or start online at Cannect.ca to explore your options and secure the best mortgage strategy for your future.