A good chunk of B.C. homeowners may be tightening their purse strings this year.
That’s according to a Thursday survey from Royal LePage, which found that West Coast residents facing higher mortgage costs plan to cut back on travel and other discretionary spending.
The real estate company’s report revealed that 53 per cent of British Columbians, and 43 per cent of Vancouverites, renewing the mortgage on their primary residence in 2025 said they expect their monthly mortgage payment to increase.
Of those people, 82 per cent said an increase will put financial strain on their household. Sixty per cent of those anticipating financial pressure said they plan to reduce discretionary spending, while 42 per cent said they plan to reduce or eliminate travel.
“In general, there’s going to be a lot of folks that ultimately had mortgages issued at those pandemic rates, sub-1.5 per cent, that are coming to renewal now,” said Adil Dinani, principal of the Dinani Group, Royal LePage West Real Estate Services.
“Amongst homeowners right now, there’s a little bit of nerves around what an approval looks like today in terms of where borrowing costs and interest rates are.”
Dinani said the current monetary policy easing cycle could provide some relief. The Bank of Canada’s key interest rate sits at three per cent after a succession of reductions from a high of five per cent last seen in spring 2024. Dinani forecasts it to come down another 100 or so basis points, although a recessionary trade war with the U.S. could cause it to sink even lower.
Meanwhile, he said the federal stress-test mechanism on fixed-rate mortgages, at two per cent higher than posted rates, creates a safety net or buffer for homeowners who are looking to renew their mortgage.
“They were [stress-tested] at essentially today’s rates, or slightly below today’s rates, in terms of what they can afford based on current income and current debt levels,” he said.
“I think that’s going to … save the market in terms of the concern around more delinquencies or folks not being able to renew or make those higher payments. I think that’s something that sometimes goes forgotten … there is that safety mechanism in the marketplace.”
There is no such stress test for variable-rate mortgages. The prime lending rate, which determines rates for variable loans, is currently 5.2 per cent. Dinani said he expects prime to be in the low fours by the end of the year.
As renewal deadlines approach, a consumer’s choice between a fixed or variable product will depend on their risk appetite, he said. On one hand, some are going variable due to the threat of tariffs and international trade tensions, which could bring down the cost of money to emergency lows.
On the other hand, there may be less appetite for variable products owing to high volatility in the recent past.
“We saw the largest escalation of interest rates in three decades over the previous two years, and I think people that were in that market, in a variable product … they may be more inclined to go fixed, just because people’s expectations of the future are generally coloured by their experience in the immediate past.”
Dinani said homeowners facing renewal at a higher rate are resourceful and will find ways to meet their new monthly payment, in order to participate in medium- to long-term price appreciation.
"They'll find a way to perhaps save less or dip into those savings, but I think Canadians are going to find a way to make the higher rates work," he said.
