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How Rising Interest Rates Affect Canadian Homebuyers: Tips to Still Qualify for a Mortgage

  • Writer: Konstantin Shaburov
    Konstantin Shaburov
  • Sep 14, 2025
  • 2 min read

Updated: Oct 17, 2025

Mortgage application form with a red “approved” stamp and a toy house on top, representing how rising interest rates affect Canadian homebuyers and mortgage approval in 2025
Tips to Qualify for a Mortgage

In 2025, interest rates remain one of the biggest hurdles for Canadian homebuyers. While the Bank of Canada has signaled modest cuts, borrowing costs are still much higher than they were just a few years ago. For many buyers, this means tougher mortgage stress tests, smaller budgets, and harder decisions. Let’s break down how rising rates affect you - and how you can still qualify for a mortgage.


Why Interest Rates Matter So Much

  • Higher Monthly Payments: Even a 1% rate increase can add hundreds to your monthly mortgage bill.

  • Stress Test Impact: Canadian buyers must prove they can afford payments at the contract rate +2%, or the Bank of Canada’s benchmark rate (whichever is higher).

  • Reduced Buying Power: Higher rates lower the total mortgage amount you qualify for.


Example: On a $600,000 mortgage, a rate jump from 3% to 6% increases monthly payments by about $1,000.


How 2025 Buyers Are Feeling the Pinch

  • First-time buyers struggle the most with affordability.

  • Move-up buyers find it harder to qualify for larger mortgages.

  • Investors face thinner margins, especially in high-priced cities like Toronto and Vancouver.


Tips to Still Qualify for a Mortgage in 2025

  1. Boost Your Down Payment. The more you put down, the less you borrow - and the easier it is to qualify. Aim for at least 20% if possible.

  2. Improve Your Credit Score. A higher score can unlock better rates. Pay down debts, avoid late payments, and lower credit utilization.

  3. Consider a Longer Amortization. Extending your mortgage from 25 to 30 years lowers monthly payments, making it easier to qualify (though you’ll pay more interest long-term).

  4. Get Pre-Approved Early. Pre-approvals lock in today’s rate and give you a clear budget range before you shop.

  5. Explore Co-Buying or Adding a Guarantor. Teaming up with family or friends, or adding a co-signer, can help you meet qualification requirements.

  6. Reduce Other Debts. Lenders weigh your debt service ratio. Paying off credit cards, car loans, or lines of credit boosts your approval chances.


Regional Impact

  • Ontario & B.C.: High home prices magnify the impact of rising rates. Buyers here need bigger incomes or down payments to qualify.

  • Prairies & Atlantic Canada: Homes are more affordable, so interest rate hikes hurt less.

  • Quebec: A middle ground, but Montreal buyers still feel pressure on condos and detached homes.


Bottom Line

Rising interest rates in Canada make homeownership harder - but not impossible. With smart planning, stronger finances, and a clear strategy, many buyers can still qualify for a mortgage in 2025. Focus on improving your affordability, and work with a knowledgeable mortgage broker or real estate professional to find the best path forward.



Interest rates may be high, but opportunities are still out there. Whether you’re buying, selling, or navigating both, we can guide you every step of the way.


 
 
 

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