Here’s a twist you might not expect in today’s market: younger Canadians are actually paying down their mortgage debt — while older homeowners are taking on more.

According to new data from Statistics Canada, homeowners under 35 reduced their mortgage balances by nearly 5% year-over-year in Q4 of 2024. Surprised? You’re not alone.

🧑‍💼 Why Are Young Homeowners Saying Goodbye to Debt?

Several factors are behind this trend:

• Rising housing costs have forced some young buyers out of the market.

• Others are taking advantage of the low-interest mortgages they locked in during 2020–2022 and aggressively paying them down.

• Many are also moving into more affordable homes — or even moving back in with family.

• And let’s not ignore the “Bank of Mom and Dad” — financial help from family is helping some reduce debt faster.

👵 Meanwhile… Older Canadians Are Borrowing Like It’s 2019

On the flip side, Canadians aged 55 and up are increasing their mortgage debt — with those 65+ seeing an 8.3% rise. Why?

Older homeowners are tapping into their home equity to:

• Buy investment properties

• Help adult children with down payments

• Or just unlock cash for other financial goals

With home equity gains over the years, many feel comfortable borrowing now — especially with interest rates projected to decline.

💡 What’s Going on With Interest Rates?

After a series of aggressive hikes, the Bank of Canada started easing rates again in late 2024. By the end of the year, the policy rate had dropped from 5.00% to 3.25% — a welcome relief for anyone managing debt.

As a result:

• Interest payments still rose, but at a much slower pace than before.

• Debt-to-income ratios improved — especially for younger households.

💰 The Wealth Gap Is Holding Steady — But Income Inequality Isn’t

While both lower- and higher-income households saw their net worth increase, the top 20% saw the biggest gains, mostly thanks to financial market growth. The good news? The wealth gap didn’t widen in 2024.

But the income gap did continue to grow — just a bit more slowly. Disposable income rose 5.9% for the wealthiest households, compared to 3.6% for the lowest earners.

What Does This Mean for You?

Whether you’re a first-time buyer, a downsizer, or somewhere in between — this data shows that your mortgage strategy matters.

✅ Younger buyers: Take advantage of lower debt levels and build a smart plan for future rate changes.
✅ Older homeowners: If you’re tapping into equity, make sure it’s working for you — not against you.

Need help reviewing your mortgage or planning your next move? Let’s talk — I’m here to help you make sense of it all.

Over the past two weeks, bond yields have dropped more than 30 basis points (0.30%). Historically, this would lead to lower fixed mortgage rates since bond yields significantly influence their pricing. Yet, many lenders, including three of Canada’s Big 5 banks, have done the opposite—raising their fixed mortgage rates.

What’s Happening with Fixed Mortgage Rates?
CIBC, RBC, and TD Bank recently increased their 3-, 4-, and 5-year fixed rates by 15-35 basis points, with RBC also raising its 5-year variable rates by 10 basis points. These changes reflect a broader trend among lenders across the country, though some have reduced rates slightly in select products.

If Bond Yields Are Down, Why Are Rates Going Up?
The relationship between bond yields and mortgage rates is not always straightforward. Rate adjustments depend on multiple factors, including:

• Market conditions
• Economic outlook
• Domestic and global events
• Lenders’ profitability strategies

Dave Larock, a mortgage broker and rate expert, describes the current rate hikes as “counter-intuitive.” He attributes them to the recent increase in bond yields from October to late November. If yields stay low or drop further, we might see rates decrease again, but Larock cautions against certainty.

Rate expert Ryan Sims suggests the banks’ slow response to bond yield changes could reflect their strategic focus. With more borrowers opting for variable-rate mortgages, lenders may need to offer more competitive fixed-rate options to maintain balance in their portfolios.

The Big Banks’ Approach
Seasonality may also be at play. Ron Butler of Butler Mortgage notes that December often marks the end of aggressive mortgage marketing campaigns, leading to rate increases. This could signal a return to more rational pricing as the big banks prioritize long-term sustainability over short-term competitiveness.

Takeaway

While bond yields influence fixed mortgage rates, they are only one piece of the puzzle. Market strategy, seasonality, and broader economic factors all play a role. For borrowers, understanding these dynamics is crucial to making informed decisions.

As millions of Canadian homeowners face mortgage renewals in the near future, many are feeling the pressure of higher payments due to persistently high interest rates.

Advice for Homeowners Facing Mortgage Renewals According to the Canada Mortgage and Housing Corporation (CMHC), around 2.2 million mortgages are set to renew in 2024, representing over 45% of all mortgages in Canada. While those with variable-rate mortgages have already felt the impact of rising rates, fixed-rate mortgage holders will soon experience a significant increase in their payments. This has caused considerable anxiety among homeowners, with 76% of those facing renewal in the next year expressing concern, a 10% rise from last year, according to Mortgage Professionals Canada.

Katy Mackenzie, a mortgage expert with TMG The Mortgage Group, notes that those who locked in historically low rates are now confronting much higher ones. Unfortunately, no one is likely to avoid the effects of this shift.

If the prospect of higher payments feels overwhelming, there are several strategies you can use to ease the financial strain:

1. Start Planning Early David van Noppen, a mortgage agent and owner of More Than Enough Financial, emphasizes the importance of early preparation. Beginning the renewal process well in advance can provide more options, such as gradually increasing your payments a few months before renewal. This can help you adjust to the higher payments more smoothly.

Mackenzie advises reaching out to your lender as soon as possible if you anticipate difficulty with the higher payments. Starting the conversation early allows you to negotiate a payment plan that works for both you and the lender, reducing financial stress.

2. Communicate with Your Lender If you’re struggling to manage your payments or foresee difficulties ahead, it’s essential to contact your lender promptly. Both Mackenzie and van Noppen stress that lenders are more understanding when you proactively address potential payment issues. Depending on your situation, lenders might offer options like payment deferral, loan restructuring, or re-amortization.

3. Consider a Mortgage Broker With rising interest rates making mortgages more expensive, van Noppen has observed that more homeowners are shopping around for the best deals. While some attempt to find deals on their own, the expertise of a mortgage broker can be invaluable. Over a third of Canadians now use a mortgage broker, with the percentage even higher among first-time buyers and recent purchasers. A broker can help you navigate the complexities of the mortgage market and secure the best deal for your situation.

4. Explore Mortgage Relief Options If you find yourself at risk of default, it’s crucial to know the mortgage relief options available to you. Under the Canadian Mortgage Charter, you may be eligible for measures such as:

• Prepaying and re-borrowing: If you’ve made extra payments, you may be able to borrow back the amount you prepaid.
• Skipping a payment: Some financial institutions allow you to skip a certain number of payments each year.
• Credit insurance claims: If you lose your job, become critically ill, or are disabled, you may qualify for a credit insurance claim that covers some or all of your mortgage payments.
• Mortgage payment deferral: This option allows you to pause your payments for a set period, though you’ll need to repay the deferred amount later.

5. Adjust Your Budget If you’re struggling to cover your higher mortgage payments, start by analyzing your cash flow to identify areas where you can cut expenses. Van Noppen suggests cutting out unnecessary luxuries like extra subscriptions or dining out. If you still can’t make ends meet, you may need to consider generating additional income or making more significant lifestyle changes.

6. Consider Selling or Downsizing If you can’t find enough money to cover your mortgage payments after cutting expenses, it may be time to consider selling your home and downsizing to a more affordable property. This could involve moving to a smaller home or relocating to a less expensive area.

7. Use Your Home Equity If you’ve paid off part or all of your mortgage, tapping into your home equity can provide the cash you need. Options include:

• Cash-out refinancing: This involves replacing your current mortgage with a larger one, with the difference paid to you in cash.
• Home equity line of credit (HELOC): A HELOC allows you to borrow against your home equity, offering flexibility in managing your finances. However, van Noppen cautions that this option should be used carefully to avoid accumulating unmanageable debt.

8. Seek Financial Counseling If you’re struggling with higher mortgage rates and financial stress, consider seeking financial counseling. A financial counselor can help you manage your money more effectively and create a plan to stay on track. Van Noppen also highlights the value of having someone to hold you accountable, which can increase your financial awareness and help you make informed decisions.

Ignoring financial problems won’t make them go away. Taking proactive steps now can help you navigate the challenges of mortgage renewal with greater confidence.

1. Economic Slowdown:

When the Canadian economy isn’t growing as expected, signs might include lower GDP growth, reduced consumer spending, and decreased business investments. In such a scenario, the Bank of Canada might lower interest rates to stimulate economic activity. Lower rates make borrowing cheaper for consumers and businesses, encouraging them to spend and invest more, which can help boost the economy.

2. Lower Inflation:

The Bank of Canada targets a specific inflation rate, usually around 2%. If inflation falls below this target, it means prices are not rising fast enough, which can indicate weak demand in the economy. To counteract this, the central bank may cut interest rates. Lower borrowing costs can increase spending and investment, which can help push prices up to the desired level.

3. Global Economic Issues:

Global economic conditions can significantly impact Canada. For instance, a recession in major trading partners like the United States or Europe can reduce demand for Canadian exports. Additionally, geopolitical tensions can create uncertainty and disrupt trade. To mitigate the impact of these external factors, the Bank of Canada might lower interest rates, making borrowing cheaper domestically to support the economy.

4. Cooling Housing Market:

A slowdown in the housing market, characterized by fewer home sales and declining prices, can be concerning. The Bank of Canada might reduce interest rates to make mortgages more affordable. Cheaper mortgages can stimulate demand for homes, supporting the housing market and, by extension, the broader economy.

5. Weak Job Market:

Signs of a weak labor market include rising unemployment and stagnating wages. If people are losing jobs or not seeing wage growth, they are likely to spend less, which can hurt the economy. Lowering interest rates can help by making it cheaper for businesses to borrow and invest, potentially leading to more hiring and better wage growth.

6. Other Countries Cutting Rates:

When major central banks, such as the Federal Reserve in the U.S., cut their interest rates, it can influence the Bank of Canada to do the same. Lower rates in other countries can strengthen the Canadian dollar, making exports more expensive and less competitive. To prevent this, Canada might lower its interest rates to maintain a favorable exchange rate and support its export sector.

7. Financial Market Volatility:

Periods of high volatility or uncertainty in financial markets can make investors cautious, leading to reduced investment and spending. By lowering interest rates, the Bank of Canada can help stabilize financial markets. Cheaper borrowing costs can encourage investment and spending, providing a boost to the economy and calming the markets.

Stay tuned for more insights into the mortgage market and economic trends! 📈💡

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