Mortgage renewal is one of the most significant financial decisions most Canadian homeowners will make in 2025. Hundreds of thousands of Canadians who locked in 5-year fixed mortgages in 2020 and 2021 — when rates were at historic lows of 1.5–2.5% — are now renewing at rates of 4.5–5.5%. For many, this means monthly payments increasing by $500–$1,500 or more. But it also means an opportunity: a chance to shop for competitive rates, negotiate with your current lender, and make decisions about amortization and rate type that can save tens of thousands of dollars over the new term.
Key 2024 Rule Change: As of November 21, 2024, Canadians switching lenders at mortgage renewal no longer need to pass the stress test — as long as the loan amount and amortization remain the same. This makes shopping around at renewal significantly easier and more accessible.
The Renewal Tsunami: Why 2025 Is a Critical Year
The Canadian Mortgage and Housing Corporation (CMHC) and major lenders estimate that approximately 1.2 million mortgage holders in Canada face renewal in 2025, with another large cohort in 2026. Most of these mortgages were originated between 2020 and 2021 — a period of historically low interest rates driven by pandemic monetary policy. The Bank of Canada's policy rate was 0.25% through most of 2020 and 2021; by mid-2023, it had risen to 5%. Even with Bank of Canada rate cuts through 2024 and 2025, today's rates remain dramatically higher than what most renewing homeowners originally qualified at.
The result: payment shock. A homeowner who borrowed $600,000 at 2% in 2020 (monthly payment approximately $2,543 on a 25-year amortization) and is now renewing at 5% faces a monthly payment of approximately $3,491 on the remaining balance — an increase of roughly $950 per month. Understanding your options at renewal is not just a financial exercise; for many families, it's urgent budgeting necessity.
What Happens at Mortgage Renewal
When your mortgage term expires, you have several choices:
- Sign your current lender's renewal offer (often at a higher rate than the best available)
- Negotiate with your current lender using competing offers
- Switch to a different lender for a better rate (now easier without the stress test)
- Refinance — change the loan amount, amortization, or other terms (requires full stress test qualification)
Your lender is required to send you a renewal statement no later than 21 days before your maturity date. However, most lenders send early renewal offers 120 days before maturity. This 120-day window is your opportunity to act.
The 120-Day Strategy: Don't Wait Until the Last Minute
Starting the renewal process 120 days (four months) before your maturity date is the optimal strategy for most Canadians. Here's why:
- Rate holds: Most lenders will hold a quoted rate for up to 120 days at no cost. If you lock in a rate today and rates rise before your maturity, you're protected. If rates fall, many lenders allow you to renegotiate to the lower rate before closing.
- Negotiating leverage: You have time to get competing offers from multiple lenders and brokers, then go back to your current lender with proof of better rates. Lenders don't want to lose customers — they will often match or beat competing offers rather than lose the relationship.
- No rush decisions: Waiting until the last 2–3 weeks before maturity puts you in a weak negotiating position and limits your options for switching lenders.
The November 2024 Stress Test Rule Change: What It Means for Switchers
Before November 21, 2024, every Canadian who switched lenders at renewal — even on a straight renewal of the same amount — had to qualify under the mortgage stress test at the higher of their contract rate plus 2%, or 5.25%. This was a significant barrier: many homeowners couldn't qualify at the stress test rate with a new lender even though they were perfectly capable of making their existing payments.
The result was a captive customer problem — renewing homeowners were essentially trapped with their existing lender because they couldn't pass the stress test elsewhere, giving lenders leverage to offer sub-optimal renewal rates.
The new rule, effective November 21, 2024, removes the stress test requirement for straight switchers — lender changes at renewal where the loan amount stays the same and the amortization period doesn't increase. This change means:
- You can shop freely among lenders at renewal and qualify simply based on your actual income and debt situation
- Lenders must now compete more aggressively on renewal rates
- Mortgage brokers can access a wider range of options for their clients at renewal
Important caveat: The stress test exemption only applies to straight switches — same loan amount, same or shorter amortization. If you want to refinance (take out additional equity, extend amortization significantly, or change other terms substantially), the full stress test still applies.
How to Get the Best Mortgage Renewal Rate
Step 1: Don't Rely on Your Current Lender's First Offer
Your lender's first renewal offer is almost never their best offer. Major banks regularly post renewal rates that are 0.3–0.75 percentage points higher than the rates available elsewhere for identical products. On a $500,000 mortgage, 0.5% difference in rate equals approximately $2,500 per year in extra interest — or $12,500 over a 5-year term. Accepting the first offer without negotiating is a costly mistake.
Step 2: Get Competing Offers
Contact at least two or three alternative lenders and a mortgage broker to get competing rate quotes. Useful sources:
- Other major banks and credit unions in your area
- Online-only lenders and mortgage companies (often offer lower rates due to lower overhead)
- Independent mortgage brokers (who have access to rates from many lenders simultaneously and earn a commission from the lender, so their service is typically free to the borrower)
Step 3: Negotiate with Your Current Lender
Take your competing offers back to your current lender and ask them to match or beat the best rate. Phrase it clearly: "I have an offer from [Lender X] at [rate]. I would prefer to stay with you, but only if you can match this rate. Can you do that?" Most lenders have a retention team with authority to offer lower rates to customers who threaten to switch.
Step 4: Use a Mortgage Broker
If negotiating is not your strength, or you want access to the widest possible range of lenders (including some that don't offer mortgages directly to consumers), a licensed mortgage broker can do the shopping for you. Brokers are compensated by the lender when they place a mortgage, so the service is generally free to the borrower. In a renewal scenario, a broker can quickly compare rates across 20+ lenders and present you with the best available option.
Fixed vs Variable at Renewal in 2025
The fixed vs variable decision at renewal requires assessing current rate conditions, your own risk tolerance, and expectations for Bank of Canada policy.
| Rate Type | Typical 2025 Rate Range | Pros | Cons |
|---|---|---|---|
| 5-year fixed | 4.5–5.5% | Payment certainty, protection if rates rise | Locked in if rates fall; higher early penalty to break |
| 3-year fixed | 4.3–5.2% | Shorter commitment, renews sooner if rates drop | Higher rate than 5-year in some markets |
| Variable | 5.0–5.7% | Benefits if rates fall; lower penalty to break (3 months interest) | Payment uncertainty; rates could rise again |
| 1-year fixed | 5.3–6.0% | Renews quickly; good if expecting significant rate drops | Higher rate, more frequent renewal cost/effort |
With the Bank of Canada cutting rates through 2024 and further cuts expected into 2025, many mortgage experts argue that a variable rate or a short-term fixed rate (1–3 years) makes sense for Canadians who can tolerate some payment variability. However, if your budget is tight and payment certainty is essential, a 5-year fixed still provides valuable peace of mind.
What to Do If You Can't Afford Renewal Payments
If your new mortgage payment at renewal is significantly higher than your current payment and threatens your financial stability, don't panic — but act early. Your options include:
Extend Your Amortization
Adding years to your remaining amortization at renewal reduces your monthly payment by spreading the mortgage over a longer period. For example, if you have 20 years left and switch to a 25-year amortization at renewal, your monthly payment will be lower (though you'll pay more total interest over time). Since November 2023, federally regulated lenders can offer extended amortizations to renewing borrowers facing financial hardship without triggering full refinancing requirements.
Switch to Variable
If fixed-rate payments are unmanageable but you can tolerate some payment variability, a variable rate mortgage may offer a lower initial payment that is more manageable in the short term while you wait for rate cuts to flow through.
Contact Your Lender Early
Lenders are regulated and incentivized to work with struggling borrowers rather than initiate costly foreclosure proceedings. OSFI's regulatory guidance specifically requires federally regulated lenders to offer hardship arrangements to borrowers in genuine financial distress. If you contact your lender well before maturity and explain your situation, they have more tools available to help than if you wait until you've missed payments.
Penalty-Free Prepayment Before Renewal
Most Canadian mortgages allow some form of penalty-free prepayment — typically 10–20% of the original principal per year, plus the ability to increase your monthly payment by 10–20%. The period just before renewal is an excellent time to make a lump-sum prepayment if you have accumulated savings:
- Reduces the principal balance that renews at the higher rate
- Reduces the total interest you'll pay over the remaining amortization
- Can be done within your annual prepayment privilege without penalty
Calculate Your New Mortgage Payment at Renewal
Use our Mortgage Calculator to compare your current payment to what you'd pay at various renewal rates and amortization periods.
Open the CalculatorFrequently Asked Questions
No. You are never obligated to accept your current lender's renewal offer. Lenders send initial renewal letters 120 days before maturity, and these offers are rarely their best rates. Shop competing offers, get quotes from other lenders and mortgage brokers, and use those offers to negotiate with your current lender. Many Canadians save thousands of dollars per year simply by asking their lender to match a competitor's rate rather than accepting the first offer.
As of November 21, 2024, you do NOT need to pass the mortgage stress test when switching lenders at renewal, as long as the loan amount and amortization remain the same. This rule change significantly levels the playing field — you can now freely shop among lenders at renewal without fear of failing the qualifying rate test. The stress test still applies to new mortgages, refinancing (changing loan amount), or significantly extending the amortization period.
Start shopping at least 120 days (4 months) before your maturity date. Most lenders will hold a quoted rate for up to 120 days at no cost. If rates rise before maturity, you're protected. If rates fall, many lenders let you renegotiate to the lower rate within the window. Starting early gives you maximum leverage and time to properly compare options without feeling rushed.
In 2025, 5-year fixed rates (4.5–5.5%) and variable rates (5.0–5.7%) are unusually close. If the Bank of Canada continues cutting rates through 2025–2026, variable borrowers will benefit from falling payments while fixed holders are locked in. However, fixed rates offer payment certainty. For borrowers with tight budgets, a fixed rate removes the risk of payment increases. For those who can tolerate variability and believe rates will fall, variable or short-term fixed (1–3 years) may be advantageous.
If renewal payments are unaffordable, your options include: (1) Extend your amortization — adding years to your amortization reduces monthly payments, though you pay more interest total. (2) Choose variable rate if fixed payments are unmanageable and you expect rate cuts. (3) Contact your lender early — federally regulated lenders must offer hardship arrangements, and they have more tools available if you approach them proactively before missing payments. (4) Work with a mortgage broker who may find a more flexible lender to restructure your terms.
Sources
- Office of the Superintendent of Financial Institutions — Residential Mortgage Underwriting (B-20 Guideline)
- Canada Mortgage and Housing Corporation — Mortgage Information
- Financial Consumer Agency of Canada — Renewing Your Mortgage