Fifth anniversaries are traditionally celebrated with wood, but five years after mortgage rates hit an all-time low,

some homeowners

are probably wishing for stone, with a rate etched in it.

About a million Canadians got the rate of a lifetime

on a mortgage

in 2021, but today find themselves married to homes that will cost them a lot more to carry over the next half-decade.

Discounted mortgage rates are hard to track with certainty, but around this time half a decade ago five-year,

fixed-rate mortgages

were as close to zero per cent as you can get, with rates as low as 1.39 per cent being offered in February 2021, according to ratehub.ca. The discounted rate is closer to 3.84 per cent today.

The

mortgage renewal story

has been playing out for the better part of two years, but Shawn Stillman, co-founder of Mortgage Outlet Inc., said he still has many clients with rates below 1.49 per cent who are facing significant increases.

The biggest concern is the potential for mortgage defaults, as people just cannot afford higher payments.

Kathy Catsiliras, vice-president of analytics consulting at Equifax Canada, said mortgage delinquencies, which include non-payment for 90 days or more, have reached 0.26 per cent based on the balances of all outstanding mortgages. That’s a small number, but it’s up about 30 per cent from a year ago.

“They are going to have to renew an interest rate they had before, and that is going to create a lot of stress for Canadians, specifically in hot spot regions like Ontario and British Columbia,” said Catsiliras.

Context is everything. I remember buying my first house back in the late 1990s, and a Financial Post colleague who had reported on double-digit mortgage rates marvelled that I was able to get a 5.65 per cent rate. Of course, my house was a lot cheaper than what buyers face today.

“I remember my parents having something like an 18 per cent back in the early 1980s,” said Catsiliras with a chuckle.

The payment shock comes with the

cost of living rising

, and it’s not offset by wages increasing at the same rate, she said.

She noted that on top of the one million Canadians facing mortgage renewals this year, about 60 per cent of mortgages outstanding will have come due over 2025 and 2026.

The Bank of Canada has suggested that one-third of mortgage holders renewing this year will face some sort of mortgage payment increase. Many who are not have simply stretched their amortization out and will take years longer to be mortgage-free.

Faced with a new rate reality, some consumers are hoping for shorter-term mortgages, in the hope that rates will head back down again.

Vince Gaetano, the principal owner of Owl Mortgage, said he is seeing many three-year terms from his clients these days.

“The ones in real trouble are the ones that need to refinance,” said Gaetano, pointing to people who barely qualified for their mortgages at 1.49 per cent and mostly just paid off interest for five years. “They lived high off the hog and still accumulated more debt. Those people are in negative amortization. They are in trouble.”

He said some are unable to refinance, but those who do are just extending their amortizations, with some as long as 90 years. They want to keep the same fixed payment, and the only way to do that is to spread it out over a longer period.

“They have to stay with the same lender,” said Gaetano. Forget about shopping around for a better rate; you take what is offered to you by your existing financial institution if you don’t think anyone else will finance your home.

Phil Soper, chief executive of Royal LePage, Canada’s largest brokerage, said he hears stories of people facing renewal issues, but they are not moving the market.

He also says changes to banking rules forced Canadians to qualify for a mortgage 200 basis points higher than 1.49 per cent, which is close to what they are getting today.

“Incomes are also rising faster than inflation,” said Soper and says the default rate is still low. “It is a third of the U.K. rate, and the U.S. default rate is six and a half times higher.”

Sean Zahedi, founder and principal of SCOP, which consults on the condo industry, said his own real estate investments have been affected by the roller-coaster ride in rates.

“It depended on where and when you got them,” said Zahedi. “There was a period where we just paid interest, and now that interest is on the downward side of things, we are doubling down on payments. It is a luxury I have, and that’s not everyone.”

He said in today’s

real estate market

, some people may be able to take advantage of prices because they are not fully dependent on loans.

“I see a lot of behaviour where people are making a lot of adjustments to lifestyle (to maintain homes),” said Zahedi. “Instead of leasing two cars, they are doing one. If they were shopping at fancier grocery chains, they are now going to No Frills. People still have a sense of pride in ownership and will do anything and everything to keep their primary residences intact.”

There is no question that renewals are going to squeeze homeowners, but Doug Porter, chief economist with Bank of Montreal, said Canadians have already started preparing.

“People who got in at exceptionally low rates ultimately knew they were going to have to renew at much higher rates five years down the road and started saving up,” said Porter, adding that the savings rate has remained sturdy and spending was muted by these factors.

There was a lot of logic for not paying down your debt when it was 1.5 per cent or lower and practically free. Without question, it was possible to get a better return on that money than just paying off your home.

But as Soper puts it, “the craziest parties result in the biggest hangovers,” and now consumers are facing the sobering consequences.

On the upside: my old Financial Post mentor would marvel at rates below four per cent.

• Email: gmarr@postmedia.com

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