Mortgage Refinancing in Ontario

Mortgage Refinancing in Ontario: What Homeowners Need to Know

As we approach the halfway mark of 2025, Ontario’s mortgage landscape continues to shift—driven by fluctuating interest rates, economic uncertainty, and growing consumer demand for financial flexibility. For many homeowners, mortgage refinancing has become a strategic tool to manage monthly costs, access home equity, or consolidate debt.

Here’s a breakdown of the latest trends and key insights in Ontario’s refinancing market:

What Is Mortgage Refinancing?

Refinancing involves replacing your current mortgage with a new one—usually to:

• Secure a better interest rate
• Switch from a variable to a fixed rate (or vice versa)
• Tap into home equity for renovations, investments, or debt repayment
• Change the amortization period to adjust monthly payments

Interest Rate Trends: Stability After Volatility

After the quick interest rate hikes in 2022 and 2023, things cooled down in 2024. By mid-2025, the Bank of Canada kept its key rate steady for several months.

Fixed rates have begun to go down a bit. This has led to many homeowners applying for refinancing. They had locked in higher rates when they were at their peak.

As of June 2025:

• 5-year fixed refinance rates in Ontario are averaging around 4.89%–5.29%
• Variable refinance rates are hovering around 5.60%–5.90%

Many mortgage holders who bought or renewed at 5.5–6.5% in the last two years are now eyeing more favorable terms.

Ontario-Specific Trends

Ontario homeowners, especially in expensive areas like the GTA, Hamilton, Ottawa, and Niagara, are using refinancing more often to:

• Access equity for home upgrades as home prices stabilize
• Pay down high-interest debt like credit cards and personal loans
• Manage payment shock from variable rate increases

In fact, according to recent reports, nearly 1 in 4 refinanced mortgages in Ontario in Q1 included debt consolidation.

Lender Innovation & New Products

To stay competitive, lenders have rolled out more flexible refinancing options, including:

• Extended amortizations up to 35 years for select borrowers
• No-penalty refinance switches in certain conditions
• Hybrid mortgages combining fixed and variable components

Alternative lenders and credit unions in Ontario are increasing their market share. They do this by offering refinancing options for self-employed people, those with bad credit, and new homeowners.

Things to Watch in 2025

1. Stress Test Rules: Even with stable rates, borrowers must still pass the mortgage stress test. This test requires them to qualify at the higher rate of 5.25% or their contract rate plus 2%.
2. Home Value Appraisals: In areas where property values have dipped slightly, refinancing for high LTV (loan-to-value) may be more difficult.
3. Penalty Awareness: If you break your current mortgage early, you may face prepayment penalties. This is especially true for fixed-rate terms. Homeowners should work with a broker or advisor to understand the costs.

Is Now a Good Time to Refinance?

If your mortgage rate is over 5.5%, or if you have high-interest debt, now might be a good time to consider refinancing. However, always weigh the costs, potential penalties, and your long-term goals.

Final Thoughts

Mortgage rates are starting stabilizing. Lenders are also providing more creative refinancing options. As a result, Ontario homeowners are discovering new ways to use the equity in their homes.

To lower your monthly payments or pay for a large renovation, you can refinance your mortgage in 2025. This can be a useful financial option. Just make sure to use it wisely.

Before making a move, connect with a trusted mortgage professional to review your options and run the numbers.