June 6, 2025 | Debt-Stressed Consumers Retrenching

Since June 2024, interest rates have trended down from a two-decade high, yet remain above the historically low levels seen during the pandemic.

Approximately 1.2 million Canadian mortgages will renew in 2025, a vast majority (85%) of which were secured when the Bank of Canada’s key lending rate was at or below 1% compared with 2.75% today. From the 1.5% to 3% range in 2020-21, Canadian fixed mortgage rates are currently in the 4.2% to 4.55% range (6.09% to 6.99% in the United States).

A recent Royal LePage survey reveals that 57% of Canadian homeowners with mortgages set to renew in 2025 anticipate an increase in their monthly payments. Among these individuals, 81% expect this rise to impose financial strain on their households, with 34% describing the strain as significant.

This financial pressure is prompting many to adjust their spending habits. Specifically, 60% plan to reduce or eliminate discretionary spending, 43% intend to cut back on travel, 36% will decrease their savings or investments, and 34% aim to reduce spending on essentials like gas and groceries. Additionally, 23% are considering obtaining a second job or finding another source of income.

Already, payments that are 90 days+ late have risen to 1 in 22 mortgages nationally.  The number of serious delinquencies increased by 72% year over year in Ontario and by 38% in BC.

All of this makes Canadians less able to absorb price increases inspired by tariffs. While the Bank of Canada is concerned about the inflationary impacts, declining demand from retrenching consumers is a reliable disinflationary force.

Danielle Park June 6th, 2025

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