Renewing Your Mortgage in 2024: Don’t Be Stuck Without Knowing Your Options

Don't Be Caught With Sticker Shock

If you are one of the 2.2 million mortgage borrowers who will be renewing their mortgage next year, you may be in for some sticker shock if you signed on five years ago with a rock-bottom fixed interest rate. CMHC estimates that the “average monthly mortgage payments could increase by an estimated 30 to 40 percent as mortgages come up for renewal over the next few years.” You may not have felt the pinch that your neighbours and friends have felt who were in variable mortgages these past few years, and now it’s time to do your research and shop around so you can figure out a way to budget this increase into your lifestyle.

As millions of mortgages approach renewal, what will Canada’s real estate market look like?

“Bourassa Ochoa of CMHC says in 2024 and 2025, up to 2.2 million mortgage borrowers will renew, representing 45 percent of all outstanding Canadian mortgages. She says they will be experiencing the worst of the interest rate shock, representing an additional $15 billion in payments, collectively.” The average increase on Canadian fixed-rate borrowers will be between 30-40%, which is a dramatic change. This will require significant budgeting or lifestyle changes for many in the country, even on top of current increases in the cost of living.

Interest rate shock ahead, with nearly half of Canadian mortgages up for renewal within two years: CMHC

“Overall, the Bank of Canada has increased its overnight lending rate – which lenders use to set their Prime and variable-rate pricing – a historic eight times between March 2022 and January 2023, from 0.25% to 4.5% today. That has resulted in a Prime rate of 6.7%, and a dramatically tougher borrowing environment.”

Renewing your mortgage in 2023: What are your options?

So what does that mean for you? 

Here are a few options that you can discuss with your lender well ahead of time:

1. Take the rate with a shorter term. 

This rate will be slightly lower than the 5-year variable and will allow you to ride out any short-term market turmoil and renew next time in hopefully better circumstances. Maybe in two to three years, interest rates will be more favorable to you, and you can take that 5-year term as you had originally planned.

2. Extend your amortization schedule.

Switching to a longer amortization means you will take longer to pay off the loan. Your monthly payments remain manageable, but you will pay more in the long run, taking longer to build equity.

3. Refinance.

After researching, perhaps you can “blend and extend” the old rate with the new, finding a medium spot where you can financially make those payments and stay in your home. The days of riding that low interest rate will be over, but you will cover your payment. Be cautious. Though this is a great way to restructure and consolidate your entire debt load, these rates are almost always higher than the best rates available.

4. Sell. 

If you are struggling right now financially, and you foresee that you may have to sell your home in a few years, a solid plan of action may be to list now before you are locked into a fixed rate with significant payout penalties; we’re talking tens of thousands of dollars that you can’t get out of. Being proactive now and finding a more suitable place within your means might be the more practical and conservative way to go.

Good News On The Horizon

Another Bank of Canada announcement of holding rates this past month signals that we will see some relief in 2024. Many economists are forecasting rate drops in 2024, but it will all depend on how our economy is doing, if inflation continues to drop, and how job numbers are performing.

Your First Lines Of Action

Reach out to your mortgage lender and determine your options well before your renewal deadline. Start researching and booking an appointment with your lender 90-120 days out of renewal time. If you are considering selling your property here in Regina and the surrounding area, JC Realty Regina is here to help. Connect with us early on before the renewal deadline so we can help you make the best decision for you and your family.

Also, be aware of the dates the Bank of Canada rate announcements are scheduled to plan for the possible scenarios around your renewal date. Mark these Wednesdays in your calendar.

Bank of Canada Announcement Dates For 2024

Post a Comment