Canadian homeowners experience a sense of anticipation and trepidation during renewal season. Will your renewal premiums increase? Will you get a better rate? Getting insight into what drives renewal prices in Canada can put you in the know and a better position. You're a new renewal or a renewal expert either way. Being in the know can save you thousands in the long term.

1. Interest Rate Policies of the Bank of Canada

One of the largest determinants of Canadian mortgage renewal rates is the money policy of the Bank of Canada or BoC. The BoC establishes the benchmark rate, and lenders' prime rate follows directly. When the BoC raises rates to curb inflation, renewal rates for mortgages increase in lockstep. When rates decrease, borrowers can expect to be offered improved renewal terms.

2. Market Conditions and Economic Trends

Mortgage interest rates depend upon economic determinants such as inflation, labour markets, and foreign financial markets. In a strong economy, interest rates go up, and borrowing gets costlier. During a recession in the economy, lenders can offer renewal rates at a lower rate to encourage borrowing and stimulate economic activity.

3. Your Credit Score

Your credit score will remain a determining factor in what renewal terms you'll receive. The better your credit score, the more likely lenders will consider you a good borrower, and you can get renewal terms at a good rate. If your credit score has improved from your last term, you can use it to attempt to get better renewal terms. If your credit score has decreased, you can expect to receive worse renewal terms or fewer options from lenders.

4. Loan-to-Value (LTV) Ratio

Your lenders consider your loan-to-value ratio, or LTV, which shows how much value in your home has been invested in your home loan. If you have built a lot of equity by making extra loan repayments or your home has increased in value, then your LTV ratio is improved. Having a low LTV ratio can result in improved renewal rates for your home loan because it reduces lenders' risk.

5. Your Current Lender's Offer and Market Rates

Most homeowners simply accept what they get from their lender when it comes to renewal. By being so, however, they could be missing a better rate in the marketplace. Lenders count on borrowers to be complacent and provide them with renewal rates that can be maximized. You can do better by shopping around with a different lender or by utilizing a broker.

6. Fixed and Variable Rate Mortgages

Your mortgage type also plays a factor in renewal rates. If you initially had a fixed rate, your renewal rate will be determined by then-current fixed rates. You'll pay a higher rate when rates have increased. If you initially had a variable rate, your rate has fluctuated annually in your term, and your renewal rate will be consistent with current rates in the marketplace. Being aware of the risks and benefits to each can lead you to a decision to switch at renewal.

7. The Length of Your New Mortgage Term

You can choose a new term at renewal. Shorter terms, like one to three years, have lower interest rates compared to longer terms, like five to ten years. Shorter terms put you through more renewals in a rising-rate environment, though. Choosing a term length involves a strategic decision between stability and potential savings.

8. Your Debt-to-Income Ratio

Your lenders will compute your debt-to-income ratio to ascertain whether you can keep making home loan repayments. If you have accrued new debt since your previous home loan term, you will be considered a risk by lenders and be charged a renewal rate. Paying off your debt before renewal can improve your chances of securing a better rate.

9. Negotiation Skills and Mortgage Brokers

Not many homeowners are aware that they may bargain for lower renewal prices. You might attempt haggling or shopping with a broker to acquire a lower rate if you think your lender's quotation isn't competitive. Brokers may typically obtain a better deal than a large bank since they have access to many lenders.

10. Special Offers and Discounts

Borrowers may be offered special deals and rates, such as cashback or discounts for bundled financial products (e.g., a chequing account and investments with a single lender). Pay close attention to these deals to get the best savings at renewal.

Final Thoughts:

How to Obtain the Best Mortgage Renewal Rate Having them in advance puts you in a position to make your best financial choice for your future at renewal. To obtain the best renewal rates in Canada, plan, review your finances, shop around with a mix of lenders, and don't be afraid to negotiate. A tiny rate reduction can equal tremendous savings in the long run. Being in command at renewal means you can make your best financial decision for your future. Are you renewing your home in the near future? Begin shopping around now and take action to get the best rate you can!