In July, 2020, Bank of Canada Governor Tiff Macklem assured Canadian households that borrowing rates were very low and would stay that way “for a very long time.”

And by all appearances, it looked like he would be right. The economy was in shambles amid widespread shutdowns and sky-high unemployment because of the COVID-19 pandemic. Many turned to government financial supports to afford basic necessities and keep businesses afloat. Inflation remained low.

But that economic picture didn’t last long. As banks offered ultra-low Mortgage rates, the real estate market roared back to life as a number of Canadians decided to buy their first home, upgrade to a better one, or buy a second home in cottage country. Despite high prices for much of the country’s real estate, the historically low mortgage rates made homeownership attractive and affordable for many.

Then, as global supply chains struggled to keep up with sharply rising demand for everything from lumber to lettuce, inflation took off, eventually reaching levels not seen in decades.

The Bank of Canada was forced to take action. In late 2021, the bank signalled that it was eyeing an interest-rate hike for the following spring. In March of 2022, the bank announced its first hike, and has since raised its policy rate from 0.25 per cent all the way to five per cent over 10 adjustments, making it one of the most aggressive rate-hike campaigns in Canadian history.

The sudden surge in rates caught many homeowners off guard. Those who opted for a variable-rate mortgage, which moves in step with Bank of Canada policy rates and Canadian bank prime rates, have borne the full brunt of rate hikes. Now, many aren’t even paying the full monthly interest owed, let alone any principal.

But even those with fixed-rate mortgages have not been spared, as 3-year mortgages signed early in the pandemic are already seeing their monthly mortgage payments double or triple. If rates stay elevated, people midway through a 5-year term will also be looking at big increases in their monthly payments.

And with inflation still significantly above the Bank of Canada’s target range, it’s possible rates could still go higher. The bank held rates steady last month, but Mr. Macklem said the current rate might not be high enough to sufficiently curb inflation.

It all means homeowners are feeling the squeeze, and facing difficult decisions in order to continue paying off their loans. They’re deferring retirement, cutting back expenses and worrying about how they will cover their next mortgage payment.

A study by the Canada Mortgage and Housing Corp., Canada’s federal housing agency, published in May, showed that consumers are less confident in their ability to afford their homes than they have been in five years. Half of those surveyed told CMHC say that they’ll need to adjust their budget to continue to pay their mortgages, and a quarter said they are “not confident their household will be able to manage the situation.”

Constrained consumer spending serves as a risk to the economy, which has largely flatlined in recent months. And dynamics have started shifting in some major real estate markets. Sales are dropping and homes are rapidly coming on the market in some major centres. New listings in September surged 44 per cent in Toronto compared with the previous year, according the Toronto Regional Real Estate Board’s latest report.

It’s a sign that more and more people are eager to exit the market, just as there are fewer buyers willing to borrow. Canada’s debt-to-income ratio – the amount that people owe in mortgages and other debt relative to their income – has slipped modestly this year but remains close to its historic record.

Meanwhile, the cost of living, including prices for basics such as food, gas and rent, remains high. Inflation had slowed for months this year, but recently turned upward again.

That’s left homeowners looking for any way to cope. Many are lengthening their mortgage amortization, stretching out the duration of their payments from 15 or 25 years to 30 years or beyond to keep their payments down to manageable levels.

“A few years ago, people were refinancing because they wanted to buy a rental property,” said Elan Weintraub, a mortgage broker and the co-founder at the brokerage Mortgage Outlet.

“Now, they’re doing it just to stay afloat.”

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Owen and Gabrielle Hewitt, Ottawa

Owen Hewitt’s mortgage keeps him up at night.

In May of 2022, he and his wife, Gabrielle Hewitt, bought a house in Ottawa for around $630,000, locking in a fixed-rate mortgage at 2.9 per cent. The couple pays $2,600 monthly. Though the term won’t be up for another three and half years, Mr. Hewitt is concerned that their mortgage payment will jump when they renew.

“I have lost sleep about having our mortgage eat our income, and the value of our house not keeping pace at all,” said Mr. Hewitt, 39. “We both work, have great careers and have no kids, and it still feels like we’re in danger of going underwater with one really bad month.”

While the couple is paying less than many who opted for a variable rate, the expense is higher than what they previously paid for rent, and it means they have had to substantially cut back their long-term savings. Previously, they were saving as much as $1,500 per month. Now, that’s down to $400 or less.

“I personally have some anxiety about whether I’ve made a choice to have a house over being able to retire. Inflation made it worse,” Mr. Hewitt said. The couple has paid for some major upgrades to the house, but there’s still work to be done.

Ms. Hewitt, 33, is more optimistic.

“As long as nothing goes catastrophically wrong, interest rates don’t go to an obscene level, and we manage our expectations of what ‘living within our means’ is, we can make those mortgage payments and enjoy a great standard of living,” Ms. Hewitt said.

Nonetheless, the couple is preparing for a potential mortgage rate increase. If they were to renew today with a five-year fixed-term mortgage at a major bank, they could expect to see their monthly payment increase to around $3,600 – a 40-per-cent jump, estimated Ian Mucignat, a Toronto mortgage broker.

The Hewitts are trying to counteract their lower savings by accepting some lifestyle trade-offs.

They said they’re keeping track of spending with a strict budget, cutting some streaming services along with dining out and entertainment, and favour used furniture and clothing and meal planning.

“I often wonder how the heck anyone who is even slightly worse off than us, or who have kids, can possibly stay ahead of the mounting cost of living,” Mr. Hewitt said.

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Ema Hidlebaugh, North Vancouver, self-employed

Since moving into her one-bedroom apartment in Vancouver in 2020, Ema Hidlebaugh has been eager to renovate her 1980s bathroom. The cracking plastic shower stall and retro surround, she says, are in dire need of an update.

But when Ms. Hidlebaugh, a self-employed blogger, recently mentioned their renovation plan to a financial planner, he advised her that the budgeted $20,000 might be needed elsewhere.

“He said, ‘Just hold on to it. You don’t know what things are going to look like next year,’ ” Ms. Hidlebaugh said.

She and her husband, Sean, bought the apartment with a five-year fixed-rate mortgage, paying $1,800 monthly at 2.44 per cent.

The move took them to North Vancouver and one of the country’s most expensive areas. It also meant downsizing. After their daughter was born, the couple moved to the 630-square-foot apartment to be closer to Sean’s work – previously, he had been spending three hours every day commuting (Ms. Hidlebaugh works from home). Ema and her husband sleep on a Murphy bed in the living room.

“There’s no smaller place than this. We can’t downsize any more.”

With their mortgage renewal just a year and a half away, Ms. Hidlebaugh says she is now considering whether the budgeted bathroom money might be better spent as a lump-sum contribution toward the mortgage. The renovation is on hold.

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Moira Adlan, London, Ont., co-owner of Hyland Cinema

After nearly two decades of running the Hyland Cinema, the last art-house theatre in London, Moira Adlan and her husband bought the building five years ago to preserve the community hub and arts venue that they had fostered there.

The business was lucrative, she said, and they had planned to find a general manager for the theatre and then retire after about two years and live off the profits.

But mounting costs – including her mortgage – have made it impossible for her to stop working.

When COVID-19 forced theatres across the country to shut down in early 2020, the couple had to dig into their own reserves to keep the business afloat. “All our savings were basically destroyed just trying to survive COVID,” Ms. Adlan said.

Since then, other costs have mounted. Ms. Adlan’s Canada Emergency Business Account loan comes due in less than four months. Suppliers have raised fees for snacks and concessions. And because of the months-long Writers Guild of America strike, she says, many of the films she had anticipated showing over the fall have been delayed.

On top of this, her mortgage has increased from around three per cent in 2018 to eight per cent now.

“When it came due, I was practically in tears,” Ms. Adlan said. “We’re barely making it. We’re getting squeezed from every possible direction.”

Now, she says they are considering cutting down opening hours to keep up with the costs. But she won’t be able to take off any time soon. Rising wages mean that Ms. Adlan has not been able to afford to bring on a general manager to replace herself. While her husband has retired for health reasons, Ms. Adlan, now 66, is still working, years after she intended to stop.

“It’s hard on me. I need to retire. But I can’t right now.”

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Edgard Navarrete, Cambridge, Ont., senior economist

When economist Edgard Navarrete saw interest rates rising last year, he started doing some calculations.

Mr. Navarrete bought his Cambridge, Ont., house at the end of 2021, signing a variable-rate mortgage at around 1.2 per cent. While he had originally hoped to find a property in Toronto, the house for Mr. Navarrete and his mother was in a comfortable and affordable area, he said.

But a year later, Mr. Navarrete, a senior economist, watched with concern as interest rates rose. He realized that he would be close to hitting the trigger rate: when the payments no longer cover any of the principal, and only work to pay off interest owed each month.

“I didn’t want to do that,” Mr. Navarrete said. “I wanted to get ahead of it.”

So, on two occasions, he has asked the bank to proactively raise his rate so he can continue to make a dent in the principal, reducing his mortgage duration from 30 to 25 years. Now, his rate is close to six per cent, and his monthly payments have more than doubled. On top of this added expense, he says his gas and electricity bill are much higher.

To balance these added costs, Mr. Navarrete said he has had to delay upgrading his vehicle, and has postponed an anticipated trip to Costa Rica. Meanwhile, he has had to make adjustments to his retirement plan.

“You have to be more prudent with what you’re spending,” Mr. Navarrete said. “You have to think about what’s a necessity and what’s a luxury.”

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Colleen Matthews, real estate investor, Calgary

As a real estate investor with around 25 units in her portfolio, Colleen Matthews says she buys to hold. But lately, she has considered whether to reverse that strategy to keep up with her mortgage costs.

Ms. Matthews’s properties include low-rise multiresidential apartments in Ontario and Calgary. When buying a new property, she says she always budgets for the possibility that the mortgage cost could double.

“Doubling was my most extreme and conservative view of where I thought interest rates could potentially go,” Ms. Matthews said.

Instead, her mortgage costs tripled.

Meanwhile, she says, her property taxes, utilities and insurance rates have also gone up, adding to her costs. Because of all the increases, she said many of the properties that previously earned her $500 per month are now losing between $1,500 and $2,000.

With rent caps on some of her Ontario properties, raising costs for many of her tenants is not an option. “There’s no possible way that you could give a tenant a $1,000-a-month increase. Nor would you want to.”

Now, she said she is considering selling property to make up for some of the losses.

“I’ve taken a look at my portfolio and identified what could be a viable option for sale.”

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Jamie Evans and Anastasia Ostapchuk

When their landlord started hinting about moving family into the unit they were renting, Jamie Evans and his wife, Anastasia Ostapchuk, took it as a sign to find their first home. Right before the pandemic, the couple signed a fixed-rate mortgage on a townhouse in Toronto’s west end that offered more space – enough to start a family.

But then they watched as interest rates fell below their own fixed rate. When they were offered the chance to switch to a variable rate in February, 2022, they accepted.

“It felt like a 50/50 shot between fixed and variable, and historically, in pristine circumstances, variable should outperform fixed,” said Mr. Evans.

But within a year and a half, that variable rate has risen prodigiously, increasing their monthly payments from around $2,500 to $6,000 – much higher than the $4,000 they had aggressively prepared for.

As a result, the couple has had to delay the next major life step they’re hoping to take: having children.

“We’re at the age and the point in our lives where kids come into the equation. This makes it really difficult to move on to that next part of life. It’s not easy. Kids are expensive.” Mr. Evans said. “We’re trying to find ways of making it work. We’re trying not to put our life on hold.”

There aren’t many areas where the couple could improve savings. They meal prep, don’t take expensive vacations, and make do with one car.

If rates continue to rise, or if the couple had an unexpected household expense, Mr. Evans said they would have to consider switching to only paying the interest, taking out a short-term loan or liquidating some of their retirement savings.

“I’m not deceiving myself to thinking that things are going to get easier,” Mr. Evans said. “The pain of continuing is better than the pain of giving up.”

Mr. Evans calculated that had the couple opted for a fixed-rate early last year instead of the variable rate, they might eventually have saved more than $100,000.

High interest rates have raised further questions about later moves. While the house would be big enough for small kids, they would hope to size up with older kids – but to afford a larger house, the couple would need to move further away from Ms. Ostapchuk’s parents.

“We are struggling. We are not the luckiest, and we’re not the unluckiest, that’s for sure. But the pain is very real,” Mr. Evans said. “The people that the rates are hurting the most are the people who were already struggling before this – first-time homebuyers.”

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Jasmine Daya, Toronto, lawyer and property owner

In November, 2019, personal injury lawyer Jasmine Daya purchased a three-story commercial property in the Yorkville area of Toronto for her company, which occupied two floors, and quickly found tenants for the other floor. She signed a three-year fixed mortgage at 5.49 per cent. Ms. Daya also owns several bars and nightclubs in the city and has other mortgages.

Then came the pandemic, and as court hearings came to a halt, her business slowed and her employees stopped coming into the office. Her tenants kept paying their bills, but they, too, weren’t coming in.

“I was sitting in this empty building, not even with the lights on, and I was like, ‘What have I done?’ ” Ms. Daya said.

When her mortgage came due last fall, Ms. Daya signed a one-year mortgage at 7.92 per cent. This added an additional $6,000 to her monthly payments, bringing them to $31,000. A key tenant did not renew earlier this year and Ms. Daya has not been able to find a new one.

Ahead of the looming mortgage renewal next month, Ms. Daya has put her office on the market. She listed the property for sale earlier this year and in mid-September, dropped the price by $1.5-million to $6-million.

“It’s not a great time to sell. But I think that’s my best option, rather than struggling every month,” Ms. Daya said. The uncertainty about the situation “is definitely anxiety inducing.”

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Colin Tran, Edmonton, recent student

Increased mortgage rates are not just making it more difficult for homeowners – they’re also having knock-on effects on rental properties across the country. For young people and students, this is a particular challenge.

Colin Tran, a technology worker and recent University of Alberta business student, said he has had to rethink his plans to move out of his parents’ house amid higher housing costs in his home city of Edmonton.

In many major cities, would-be buyers, unable or unwilling to get a mortgage, are turning to rental properties instead, pushing up demand for condos and apartments. And landlords with their own mortgages are raising the rent to cover their own rising costs.

Because the city has historically been affordable, young people in Edmonton often leave their parents’ home right after graduating university, Mr. Tran said. Between the influx of new people to the city during the pandemic and current housing market, he says his move-out date has been pushed further and further away.

“In Edmonton, you don’t expect to have to save that much, and you don’t have to expect to earn that much. At least, you didn’t five years ago,” Mr. Tran said. “All of a sudden, things are nowhere near affordable.”

While he’s happy at home for now, he said he’s missing some of the independence he had hoped for after school. He’s also had to think more about increasing his income. That might even mean moving to Toronto, where tech salaries are higher.

Until then, he’s been putting the money he’s saving into a First Home Savings Account in the hopes of using it for a down payment one day.