The potential for US tariffs to trigger inflation, leading to higher interest rates and, consequently, higher mortgage rates in Canada, is a real concern. There are arguments and contradictory indications for rates to go down in the near future, but in the longer term they may go the other way and climb.
Canadians considering taking out a mortgage, or those with existing variable rate mortgages, should be aware of this potential risk and factor it into their financial planning. Monitoring developments in US trade policy and the responses of central banks will be crucial for understanding the future direction of Canadian mortgage rates.
What does this mean as a mortgage consumer? It should matter little to be honest. Your core game plan should not change: Look at the mortgage payment, and if it fits into an overall financial plan you are happy with holistically, then stay fixed-rate. Don’t add risk needlessly, especially if your margin for error is slim.
Furthermore, mortgages are long term debts consisting of multiple terms for a total loan life of 25 years or longer. That said, if you take a short term fixed now and the variable happens to do better for that term, then don’t sweat it, you can do better on your next term. My advice is that if you can’t afford increasing mortgage payments or interest (both financially and psychologically), then my recommendation would be to lock in with a fixed rate term now and try to beat the rate game next term. Conversely, for those who have lots of equity, secure savings/ investments, and are comfortable with some extra risk, then perhaps consider the variable rate for a few months. For those who like cake, why not ride the variable rate for now and lock into a fixed rate after a few months when this tariff uncertainty becomes more clear.
All the best with navigating the challenging times ahead. As always, here to chat if you need me.
