An avalanche of mortgage renewals is about to hit the Canadian mortgage market in 2024. Depending on whose statistics you are following, there are anywhere from 25% to 45% of all Canadian mortgage holders due for renewal this year, over the next 12 months.
The payment shock these mortgage holders are about to experience could be historic. Prime rate hovered between 3.20% and 3.45% in 2018 and discounted fixed rates for a 5-year term were in the 2% range. Fast forward to 2024, prime is at 7.2% (a full 4% higher), and discounted five-year fixed mortgage rates are in the high 5s. The effect of the rising interest rates will have painful consequences for those renewing this year, with monthly mortgage payments increasing exponentially in some cases. Consumers’ circumstances may have changed since their last mortgage renewal, and the new payment shock could wreak havoc on the family finances; here is some advice to manage the process:
Start Early
Know your renewal date and reach out to your mortgage broker or financial advisor at least three months before your renewal date. This will give you a chance to prepare to meet any new requirements of your existing lender and the maximum opportunity to get a better-competing offer from another lender.
Review Advice Blogs
A wide array of mortgage advice is available for free on the internet and other media such as BNN, Bloomberg, Yahoo Finance, and others. Some of it is excellent advice with creative strategies, some not so much, but take the time to get informed; your mortgage professional can help you sift through the clutter and devise a solution that will fit your budget and lifestyle.
Review the Bank of Canada Website
This website provides unbiased information and historical trends for interest rates and the mortgage market. It can help you spot a trend and give you a good background of the market’s direction before you consult with your mortgage professional.
Consider Your Options
Renewing a mortgage today is a stressful exercise, but there are many options at renewal time to consider that can ease the pain; here are a few to consider:
- Make a Lump Sum Payment
- Renew for A Shorter Term and wait out the Higher Interest Rates.
- Renew into a Variable Rate Term and ride the Mortgage Interest Rate Curve down with the Bank of Canada Interest Rate Policy changes.
- Extend Your Amortization
- Consider Downsizing
- Rent a Room or consider adding a suite as a “Mortgage Helper.”
Exploring these options is crucial in navigating your mortgage renewal successfully, especially in today’s challenging financial landscape. Our team of experienced mortgage professionals is ready to guide you through this process, offering personalized solutions tailored to your unique financial situation. Don’t let the stress of mortgage renewal overwhelm you. Contact us today for expert advice and find a mortgage strategy that not only meets your needs but also positions you for a more secure financial future.