Trump Tariffs

Trump imposed tariffs threaten inflation & the Canadian housing market

Trump announced 25% tariffs on Canadian imports. Canadians are wondering how this will impact lenders and the cost of money. 

Trade war threats last week pushed the Bank of Canada bond yields lower last week. Typically, lenders would have responded by lowering their fixed mortgage rates. Increased risk in the market prevented this from happening as lenders digest this new economic shock. 

So, while the initial response of the trade war by bond markets is to push down yields, tariffs are inflationary, so we expect longer-term bonds to respond. In this scenario, both bond yields and fixed mortgage rates that they are priced on will rise.  

The Bank of Canada, on the other hand, is expected to decrease its policy rate and provide a stimulus for the economy as the trade ward tightens spending. This is positive news for those in variable rates. Expectations are for further rate decreases as this trade war deepens.  

For borrowers that prefer the stability of fixed rates, we are recommending 3 or 5-year fixed terms. Those waiting for fixed rates to continue to drop will want to watch closing as, over the longer term, we can expect rates to increase if the trade wars worsen or continue down the road they are threatened.  

For borrowers who can tolerate change and want a variable rate,  you may be in for several more Bank of Canada rate cuts to stimulate the economy. 

HELOC products with a fixed and line of credit portion may allow borrowers the best of both worlds. Locking in a fixed rate portion while paying down debt or mortgage on the Heloc, which is expected to continue to decrease. These products also give you access to cash if and when you may need it in the future without further qualification with the bank. 

Call to discuss what fits your situation best. All that is certain is that we are in for a bumpy road, so a solid plan will help weather this storm.