Mortgage wars looming as some Canadians take advantage of lower rates
The heads of Canada’s top banks expect many mortgage holders to be able to renew at lower rates over the next two years as the lenders compete for a larger share of the market.
Royal Bank of Canada chief executive Dave McKay said 60 per cent of the bank’s customers will renew at lower rates in 2025. Of those who will renew at higher rates, he said 80 per cent will meet the requirements of the industry’s mortgage payment stress test, which essentially means they can manage to make higher payments.
These numbers don’t imply that Canadians aren’t struggling with their payments now, he said, but the risk of not being able to absorb higher mortgage payments has come down.
“When we look at the cohorts that have higher payments, look at the overall payment shocks, it has decompressed significantly,” he said at RBC Capital Markets’ Canadian Bank CEO Conference on Tuesday.
Toronto-Dominion Bank’s chief operating officer Raymond Chun said about a third of the mortgages coming up for renewal in 2025 and 2026 were also renewed in the past few years.
“People had renewed into short term — one year, two years — anticipating interest rates coming down,” he said. “Not everybody is actually renewing at higher rates. A third of the renewals are actually probably renewing from higher rates … down to lower rates.”
After keeping interest rates high for a prolonged period to tackle high inflation rates, the Bank of Canada started cutting rates last year. The cuts are gradually shifting the focus from “mortgage payment shocks” to higher competition for renewals, analysts say.
About 55 per cent of all mortgages with Canadian banks are expected to be renewed in the next two fiscal years and 85 per cent in the next three fiscal years.
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