Canada Mortgage Renewal Squeeze: 45% Spend Half Their Budget on Housing

Canada is going through a major wave of mortgage renewals, and more households are beginning to feel the pressure of higher borrowing costs.

A recent survey commissioned by Rates.ca and conducted by Leger found that among Canadians who have renewed their mortgages since January, 82% are now facing higher borrowing costs. Most saw their mortgage rates increase by 2 to 4.99 percentage points, while 45% of households that completed a renewal said mortgage payments now consume at least half of their total household budget.

For some younger homeowners, the pressure is even more severe.

82% Share of mortgage renewers facing higher borrowing costs

45% Households spending at least half their budget on mortgage payments

+2–4.99 pts Typical increase in mortgage rates among respondents

Mortgage Renewals Are Reshaping Household Budgets

The survey found that among Canadian homeowners who renewed their mortgages this year, nearly half are now putting at least 50% of their household budget toward mortgage payments.

That level is well above the housing affordability ranges commonly recommended by financial institutions. RBC notes on its website that mortgage-related housing costs — including principal, interest, property taxes, heating and condominium fees — should generally stay within about 30% to 32% of gross household income.

In reality, many households are now well beyond that range.

When half or more of a household’s monthly budget goes toward mortgage payments, there is significantly less room for food, transportation, childcare, insurance and other everyday expenses. A job loss, home repair, medical expense or other financial shock can quickly reduce a household’s financial flexibility.

Younger Homeowners Are Feeling the Largest Impact

Among different age groups, homeowners between the ages of 18 and 34 appear to be facing the greatest pressure.

The survey found that 90% of homeowners in this age group faced higher rates when renewing. Among them, 56% said housing costs now consume between 50% and 70% of their household budget.

90% Homeowners aged 18–34 facing higher renewal rates

56% Younger homeowners spending 50%–70% of their budget on housing

50%–70% Share of household budgets going toward housing for many younger owners

For many younger homeowners, that means five to seven dollars out of every ten dollars in the household budget may already be committed to housing.

Homeowners born outside Canada are facing similar pressure. The survey found that housing costs for this group also commonly consume between 50% and 70% of household budgets, compared with 35% among Canadian-born homeowners.

One reason younger homeowners may be under greater pressure is that many entered the market during a period of high home prices and large mortgage balances. Once their lower-rate mortgages expire, monthly payments can rise significantly even if household income has not increased at the same pace.

Four in Ten Homeowners Are Choosing Five-Year Mortgage Terms

Faced with uncertainty around future interest rates, many homeowners are choosing longer terms in exchange for more predictable payments.

Among homeowners who renewed their mortgages this year:

40% Chose a five-year mortgage term

35% Chose a three-year mortgage term

7% Chose a term longer than five years

40% chose a five-year mortgage;
35% chose a three-year mortgage;
Only 7% chose a term longer than five years.

This suggests that after facing higher monthly payments, many households are prioritizing predictable borrowing costs over taking on the uncertainty of shorter-term rate changes.

Rates.ca mortgage and real estate expert Victor Tran recommends that homeowners approaching renewal begin comparing offers from different banks and lenders at least 120 days in advance. He says borrowers should consider not only the interest rate, but also the mortgage term, amortization period and prepayment flexibility.

Start comparing mortgage renewal options at least 120 days before the renewal date. The rate matters, but so do the term, amortization period and prepayment flexibility.

Mortgage Renewals Are Squeezing Other Household Spending

The impact of higher mortgage costs extends beyond housing itself.

When half — or even 70% — of a household budget is devoted to housing, other spending naturally comes under pressure. Families may reduce discretionary spending, delay major purchases, or even cut back on saving and investing.

This is one of the broader implications of the current mortgage renewal wave. It is not simply an interest-rate issue between lenders and borrowers; it can also reshape household consumption patterns.

For younger families in particular, rising mortgage payments combined with higher food, transportation and childcare costs leave an increasingly small share of income available for discretionary spending.

Large mortgages taken out during Canada’s long period of low interest rates are now gradually being repriced. As more mortgages come up for renewal, similar budget pressure could spread to more households.

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