Navigating rising mortgage rates: What homeowners need to know

Rising mortgage rates

Mortgage rates are on the rise again, prompting concern—and questions—from homeowners and buyers across the country.

After a brief dip earlier this month that saw high-ratio fix-year fixed rates fall as low as 3.64%, the market has since reversed course. Fixed rates, both insured and uninsured, have crept up by 10 to 20 basis points and the trend is consistent across the board.

But it’s not just fixed rates that are being affected. Variable-rate mortgages, once a popular choice for their lower interest rates and flexibility, are becoming more expensive in their own way. The discounts typically offered off the prime rate—currently sitting at 4.95%—are shrinking.

Major lenders like CIBC and Scotiabank have reduced their variable-rate discounts, and this shift is happening gradually across the entire industry.

This rising-rate environment comes at a time of broader economic uncertainty. Global trade tensions, tariffs, and stock market volatility are all contributing to an unpredictable financial landscape. For Canadians navigating mortgage decisions, this uncertainty complicates the choice between fixed and variable rates.

Still, it’s not all bad news for those considering variable rates. Despite current variable-rate pricing inching higher due to smaller discounts, many industry experts believe these rates could ultimately fall in the months ahead. That’s because the Bank of Canada is expected to continue lowering its policy rate in response to broader economic concerns. If the bank cuts aggressively later this year, today's variable-rate borrowers could end up paying less interest overall compared to those locked into higher fixed rates.

The key, however, is understanding whether a variable-rate mortgage is right for you. If your financial situation can handle some fluctuation—and you're not overly risk-averse—choosing a variable rate today may prove cost-effective over time.

"Broadly speaking, if a fluctuating mortgage rate won’t put you under worrying financial pressure and if you are comfortable with the inherent uncertainty of a variable rate, I think the variable rate will likely prove to be the cheapest option,” one expert noted.

In addition, variable rates often offer greater flexibility, making them ideal for homeowners expecting a major life change—like a move or job relocation—within the next few years. Variable mortgages tend to come with significantly lower penalties for breaking the term early, which can be a substantial financial advantage.

For homeowners already facing increased payments due to rising rates, here are some practical steps to consider:

1. Review and assess your financial health: Begin by examining your current income, expenses, and financial obligations. Understanding how rising mortgage payments impact your monthly budget is critical to managing them effectively.

2. Adjust your budget: Create or revise your budget to reflect the new reality. Prioritize essential spending and look for opportunities to reduce discretionary costs. These savings can be redirected toward your mortgage or other financial goals.

3. Consult a mortgage broker: Seeking professional advice is one of the most effective ways to navigate changing mortgage conditions. A qualified mortgage broker can offer personalized strategies for managing your mortgage payments, consolidating debt, or even switching products to better align with your long-term goals.

It’s important to remember variable-rate mortgages should not be used as a short-term tactic to “time” the market. Instead, they are best viewed as a long-term strategy for borrowers who value flexibility and can tolerate some level of financial unpredictability.

As we move through this shifting mortgage landscape, informed decision-making will be key. Whether you’re a first-time buyer or a seasoned homeowner, understanding your options and adapting your strategy can help you weather this period of rising rates—and potentially come out ahead.

Please reach out to me at [email protected] if you would like some guidance or you can always book a time for a chat on my calendar. Go to calendly.com/april-dunn

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

Access to your homes equity can help in many ways

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Thinking about buying a vacation property?

Vacation property tips

With a growing number of Canadians choosing to vacation at home this year—partly in response to ongoing trade tensions with the U.S. and a desire to support our own economy—interest in local getaways and vacation properties is on the rise.

If you’ve been thinking about buying a cottage, cabin or seasonal retreat, there’s no better time than now to explore your financing options. Here’s what you need to know before you make the leap:

Start with a mortgage pre-approval—Before browsing listings or booking showings, it’s important to get pre-approved for a mortgage. That will help clarify your budget and gives you an edge if you’re ready to make an offer.

There are two types of vacation properties. Vacation homes generally fall into two categories, Type A and B. The category affects how much you can borrow and what the down payment requirements will be.

Type A properties

These are more traditional secondary homes and must meet these criteria:

• Foundation must be permanent and installed beyond the frost line. That includes concrete, concrete block or preserved wood foundations, or post or pier foundations on solid bedrock.

• Must be zoned and used as residential, rural or seasonal. Mixed uses or rental pooling is not accepted.

• Property tenure must be freehold or condominium.

• At minimum, property must have a kitchen, three-piece bathroom, a bedroom, and a common area.

• Remaining economic life must be 25 years.

• Year-round road access on reasonable quality public roads, serviced by the local municipality.

• Privately serviced roads are allowed, provided there is a maintenance contract in place.

• Property must be winterized with a permanent heat source. For example, heating can be baseboard, forced air, water radiator, radiant, coal, propane, geothermal heat pumps, or heat pumps.

• Good quality construction with no signs of deferred maintenance.

• Water source: well, municipal serviced, and cistern. Water source must be drinkable. Lake or river water is acceptable, provided the property has its own filtration system. For example, a reverse osmosis system.

• Property must have electrical power. Alternative energy sources may be considered on a case-by-case basis such as solar power, wind energy and generators.

• There must be good market appeal in the area with no adverse influences or neighborhood nuisances.

Type B properties

• No permanent heat source is required. For example, a wood stove, fireplace, stove or heat blower is acceptable.

• Foundation may be floating. For example, sitting on blocks.

• Seasonal road use is acceptable. This means the road does not have to be ploughed during the winter.

• Water source needn’t be drinkable. However, there must be running water in the home.

• Property may be accessible only by boat.

• Holding tanks may be considered provided it is common for the immediate area and meets all municipal/provincial requirements (e.g., CSA approved holding tank).

Maximum property value

• Greater than 80% loan-to-value ratio. Property value must be less than $1.5 million.

• Less then or equal to 80% loan-to-value ratio. Property value must be less than $1 million.

Note: Mixed uses or rental pooling is not accepted. Co-ops or interest ownership is not accepted. No investment properties.

Financing options beyond the basics

If you already own a home, you might be able to leverage your existing equity to fund your vacation property:

• Refinancing your current mortgage

• Home equity line of credit (HELOC)

• Second mortgage

• Personal savings

• Gifted funds (Type A only)

Even hotel condo units may be eligible for up to 95% financing, provided they are high-ratio insured and owner-occupied.

Every lender has different rules

Lender requirements for vacation properties vary significantly, especially in rural areas where 25% to 50% down may be required. A mortgage broker can help you compare your options and find the best fit for your goals.

So, explore what’s possible. Whether you're looking for a peaceful family retreat or planning a smart real estate investment, a mortgage broker is there to guide you through every step.

You can email me at 1-888-561-2679 or book a time to chat at calendly.com/april-dunn.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

What you can do if your mortgage application is declined

Mortgage rejection options

There is nothing more disheartening that having your mortgage request declined because qualifying for a mortgage today is more complex than it once was.

That is why it is so important to include a condition for financing in any offer to purchase a new home. Don’t assume you will be approved now because you were in the past or you only want to move your current mortgage to a new property.

Even if your bank says no, you may still have options. Let’s explore some common reasons for mortgage declines and how you can improve your chances of approval.

Here are some of the most frequent reasons why lenders might reject a mortgage application:

You didn’t pass the mortgage “stress test”—Although the current mortgage stress test rate is 5.25%, you must qualify at the contract rate plus 2%. For example, if your contract rate is 4.69%, you’ll need to demonstrate you can afford payments at 6.69%. All federally regulated lenders (such as banks) and most credit unions follow this rule. There are some exceptions, so make sure you chat with your mortgage broker to see where you might fit with some of the new rules for qualifying.

Low credit score or poor credit history—Lenders typically look for a credit score of 680 or higher to offer the best mortgage rates. If your score falls below that threshold, it could limit your options or result in higher interest rates with an alternative lender.

Insufficient income—Your income needs to cover not only your mortgage payments but also property taxes, heating costs, strata fees and day-to-day expenses like groceries and transportation. If your declared income is too low, you may not qualify for the amount you’re seeking.

Employment instability—Lenders typically prefer salaried or hourly employees with consistent, guaranteed income, generally in the same line of work for a minimum of two years. Self-employed individuals—especially those with newly established businesses—often face more scrutiny.

Property issues - Lenders aren’t just approving you, they’re also evaluating the property. Structural damage, mold or other significant issues can raise red flags, as those problems often lead to costly repairs. Properties with major defects may not meet lender requirements.

Low appraised value—If the property’s appraised value comes in lower than expected, it could affect your mortgage approval. For a purchase, this may mean needing a larger down payment. In the case of a refinance, the amount you can borrow is capped at 80% of the appraised value, which could limit your access to equity.

A mortgage broker can help you strengthen your mortgage application and explore alternative lending solutions. Here’s how:

Credit improvement: If your credit score is holding you back, the broker can develop a plan to repair it, by consolidating or paying off certain debts or ensuring timely payments.

Debt management: A broker can assess your financial situation and create a strategy to reduce debt, making your application more appealing to lenders.

Property evaluation: A broker can help you understand how different property types affect financing and guide you in setting a realistic budget.

Down payment planning: If your downpayment is too low, a broker can outline a savings plan.

Alternative lender options: If you’re self-employed or don’t meet the strict criteria of traditional banks, a broker has access to alternative or private lenders who offer more flexible short-term solutions. With a plan, that can be an excellent alternative.

To house hunt with confidence, consider getting pre-approved before you start viewing properties. A pre-approval ensures you know your borrowing power and reduces the risk of falling in love with a home you can’t finance.

If your mortgage application has been declined, don’t lose hope.

You can email me at [email protected] to discuss your situation. Or book a consultation at: calendly.com/april-dunn

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.