Ontario homeowners and buyers are breathing easier after the Bank of Canada’s rate cut on October 29 — yet uncertainty still clouds the economic outlook and Ontario’s housing market. After two consecutive reductions, the overnight rate now sits at 2.25%. Many homeowners are asking the same questions: How much will my payments rise when my mortgage renews? Is it time to refinance? Will I actually qualify for the mortgage I need?
For many, these questions are more than financial — they’re about peace of mind and stability. The answers are mixed: rates are lower, but affordability remains strained due to strict stress tests, slow wage growth, and high prices in major cities. Understanding how these changes affect your mortgage options is essential in 2025.
1. The Impact of Rate Cuts
The Bank of Canada’s second rate cut in October 2025 brought the prime rate to 4.45%. With common lender discounts, new five-year variable rates now average around 4% for qualified borrowers, while five-year fixed rates have eased modestly, hovering near 4.50%.
For many buyers, these reductions help slightly — monthly payments are more manageable, and pre-approval amounts rise modestly. But for others, affordability remains tight as household incomes haven’t kept pace with the cost of ownership. Even a one-percent change in mortgage rates can translate into hundreds of dollars in monthly savings or costs.
2. Mortgage Renewals: Still Facing Higher Payments
Homeowners coming up for renewal in 2025 are still seeing the largest payment shocks in over a decade. Even with rate cuts, today’s renewal offers can still be 25%–40% higher than what borrowers paid during the pandemic’s ultra-low-rate years. For homeowners coming off 1.79% mortgages, the jump is steep. A $500,000 mortgage that once cost ~$2,060/month now costs ~$2,760/month—a $700 increase.
Here are a few smart renewal strategies:
- Start early. Begin renewal discussions four before your term ends.
- Compare fixed vs. variable. Fixed rates have fallen slightly, while variable could benefit further from future cuts.
- Consider shortening your term. If rates continue to decline, a shorter renewal period could save money overall.
- Work with a licensed mortgage broker. Brokers can compare multiple lenders and help you avoid paying more than necessary.
In short, working with a broker can help you navigate today’s complex market, especially if you face renewal in early 2026.
3. The Stress Test Still Stands in the Way
Despite the Bank of Canada’s recent rate cuts, the mortgage stress test continues to limit how much new buyers can borrow. Lenders must still qualify applicants at the higher of 5.25% or contract rate + 2% — often above 6.50% this fall.
However, as confirmed by OSFI’s mortgage stress test guidelines, homeowners switching lenders at renewal — without increasing their loan amount, extending amortization, or changing ownership — are exempt from the stress test. This exemption allows qualified borrowers to shop for better rates at renewal without re-qualifying at artificially high levels.
If you refinance, add funds, or extend amortization, add or remove one owner, you must still re-qualify under the stress test — the exemption applies only to “straight switch” renewals.
💡 Tip: Even with lower rates, many Ontario families still spend over 50% of their income on housing. Budget conservatively and review your total debt-to-income ratio before purchasing or refinancing.
4. What’s Happening in Ontario’s Housing Market
The good news? After years of intense competition, Ontario’s housing market has finally shifted to a buyer’s market. More listings are coming to market, and prices have softened modestly.
As of September 2025, the average home price across Ontario was approximately $830,000, about 3% lower than last year, though still slightly up from the summer lows.
This adjustment offers cautious optimism. Buyers now face more negotiable prices and slightly better affordability. However, regional differences remain sharp — smaller-city markets see deeper corrections, while major areas like Toronto, Ottawa, and Kitchener-Waterloo continue to experience tight supply, except in the condo segment, where listings have increased more noticeably.
5. What Buyers and Homeowners Should Do Now
If you have a renewal coming up or plan to buy soon, here are 6 key tips:
- Renew early. Many lenders allow rate holds up to 120 days — take advantage to lock in savings.
- Get pre-approved. Secure today’s rate while you shop for the best property.
- Refinance strategically. Consider whether consolidating debts or adjusting your home size — upgrading or downsizing — makes sense in today’s market.
- Stay flexible with term length. If further rate cuts are expected, shorter terms may offer more flexibility.
- Compare fixed and variable options. Use Maurice’s free Mortgage Calculator app to calculate the break-even point and see which structure fits your financial goals.
- Explore reverse mortgage solutions. For homeowners over 55, a reverse mortgage can free up cash flow by eliminating monthly payments.
Even a small difference in rate or term structure can make a meaningful impact over the life of your mortgage.ct over the life of your mortgage.
6. Common Questions
Will more rate cuts happen in 2026?
The Bank of Canada’s path will depend on inflation, wage growth, and employment data. Most analysts expect at least one more modest cut if inflation remains near 2%.
Will housing prices rise again soon?
Likely gradually. While lower borrowing costs can support demand, affordability challenges, tightening immigration quotas, potential U.S. tariff threats, and the high stress-test threshold will keep prices from rebounding quickly.
Is now a good time to refinance or buy?
If your financial position is stringent, yes — especially if you plan to stay in your home for several years. The current window offers a chance to reset your mortgage before rates shift again. Bear in mind that carrying too much credit card or line-of-credit debt could jeopardize your credit score.
Conclusion
The 2025 rate cuts mark cautious progress — not complete recovery.
Rates have eased, but qualifying remains difficult and affordability challenges persist. Whether you’re renewing, refinancing, or buying for the first time, now is the time to stay informed and proactive.
With thoughtful planning and professional guidance, Ontario homeowners can navigate this new phase confidently — turning lower rates into real opportunity instead of short-term optimism.
If you have a special case, feel free to contact me, and I will guide you in the right direction.
Turn uncertainty into opportunity — start planning your 2026 mortgage strategy today.
Maurice Kwok, MBA CPA MA
Mortgage Broker | Sherwood Mortgage Group
FSRA Licence #12176 | (416) 618-9312
maurice@mortgagemaurice.ca | mortgagemaurice.ca
All images are commercially licensed to Maurice Kwok through Envato Elements for use on MortgageMaurice.ca.