In a month-and-a-half, it will officially be 2019. What will the future bring for you? If you’re anything like almost 50% of Canadian homeowners, it might bring a mortgage renewal.

The Bank of Canada estimates that 47% of residential Canadian mortgages with Big 6 banks will be up for mortgage renewals in the coming year, with another 31% coming due in the next one-to-three years.

This is significant because economists are already predicting something else 2019 will bring — higher interest rates and, in turn, higher mortgage rates.

Since July of 2017, the Bank of Canada (BOC) has increased Canadian interest rates five times going from 0.5% to 1.75%. Experts predict that interest rates could reach 2.5% by 2020.

Plus, the beginning of 2018 saw new mortgage regulations introduced, which dramatically affected the Canadian housing market, shifting supply and demand.

If you’re facing a mortgage renewal in 2019, here are the three things that you need to know:

1. Mortgage stress tests and house prices are keeping many out of the Canadian housing market.

Mortgage Professionals Canada found that 100,000 Canadians have been prevented from buying a home due to new stress test regulations. Resale activity in Canada has fallen by 12.5% compared to 2017 and is down 16.5% from 2016.

The homeownership rate in Canada is slightly down, too, from 69% in 2011 to 67.8% in 2018.

If you are up for mortgage renewal and planning to move, this could mean that selling your current home may be more difficult. It could also be harder to find another house in a similar price range to move into.

2. Interest rates are on their way up.

In July of 2018, mortgage renewal rates were still fairly standard. Mortgage Professionals Canada found that the average five-year fixed-rate mortgage renewed at 3.32% (vs. 3.31% in 2013). The average five-year variable-rate mortgage renewed at 2.50% to 2.75% (vs. 2.73% in 2013).

While this wasn’t much of a difference in July of 2018, the gap could grow in 2019. Canadian interest rates are continuing to increase. This could, in turn, affect mortgage renewal rates.

And some homeowners have been getting much higher rates on renewal, depending on their lender and the length of their term. For instance, one homeowner who had a seven-year mortgage term spoke with CBC News in June of 2018 and said that he had been given a significantly higher rate on renewal (2011 vs. 2018).

Plus, small fees can add up. CBC News did the math and found that on a $300,000 mortgage, even a tiny rate hike of an extra 30 basis points on a 25-year mortgage at a fixed rate of 3.74% for five years can add an extra $15,000 in interest costs over the entire life of the loan.

That’s an extra $50 per month. On larger mortgages, the increase would be even more.

3. Mortgage renewals aren’t exempt from the stress test.

Borrowers do not have to undergo the mortgage stress test on renewal if they stay with their current lender.

But if you are considering switching lenders to get a better rate, then you would find yourself being subjected to the test.

The stress test requires the borrower to prove that they could afford their mortgage at either the average of what the big banks currently offer as their five-year fixed term, or two percentage points higher than the actual loan.

For example, if you had a mortgage rate of 3.25%, you might have to prove that you could afford a mortgage rate of 5.25%.

If you cannot pass the test at a federally regulated lender, the lender cannot give you the loan, which would either force you into a smaller mortgage and a cheaper home, or even out of the market altogether.

Alternative lenders and credit unions do not have to follow the stress test rules.

If your mortgage is up for renewal in 2019, starting to plan now for these eventualities will leave you more prepared.

• Look at your current mortgage rate and compare to other rates on the market.
• Take a hard look at your current finances and debt levels to see if you would pass a mortgage stress test.
• Ask how a higher mortgage rate would affect you — could you afford it?
• When it comes time to renew, if you decide to switch lenders, shop around. Know your options. It may be more cost-effective to choose an alternative lender or credit union.

At DebtCare Canada, we can help you manage your debt and finances to make sure that you can pass a mortgage stress test.

Contact us today for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca.