HuronMortgages.ca Outlook for the Next 6 Months

Here’s What He’s Said Which Means Little, But We’ll Pretend

Trump has promised lower interest rates. That will be largely out of his control.
Ah, the dream of Donald Trump lowering interest rates—a plan about as realistic as using a hairdryer to put out a fire. During his campaign, Trump promised to fix the high interest rates, but it turns out that lowering them isn’t as simple as tweeting at Jerome Powell. Interest rates, especially on mortgages, are more like a cocktail of bond market trends, inflation jitters, and investor sentiment—definitely not something you can just “make happen” by threatening to fire the Fed chair on Twitter.

While Trump may have wished for direct control over rates (because what other major economic decision could be so easy?), the Federal Reserve operates independently, meaning the president can’t just snap his fingers and change the game. For our regular readers let me apologize as you I’m sure you likely feel you’re in Eco 101 at University of Nipissing.  Basic stuff: we know.  But with some humor.   Sure, Trump can keep suggesting ways to fix things (like tariffs or tax cuts), but these could actually push rates higher by stoking inflation—it’s like saying, “I’ll fix the plumbing, but first let me break the sink.”

And if you’re a Canadian hoping for some mortgage rate relief as a result of Trump’s win, here’s the bad news: Trump’s policies could actually end up giving that dream the boot. With U.S. economic policies under Trump likely pushing the inflation needle higher—think aggressive spending, deregulation, and tariffs—U.S. bond yields are likely to climb. And when U.S. yields rise, Canadian fixed mortgage rates will follow suit, as if they’re two train tracks heading in the same direction. So, if you’re eyeing a house or hoping to refinance, brace yourself for the possibility of higher rates in 2025—maybe even a little sooner. 

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Oh, and if you’re waiting for rates to drop anytime soon. That’s about as likely as finding a unicorn in your backyard. The markets are predicting only a tiny dip in fixed rates—like finding a loonie in your couch cushions—pleasant, but hardly life-changing.

In the meantime, if you want a good night’s sleep without stressing over your mortgage, locking in a fixed rate around ~4% or less if you’re my client; might be your best bet. For those hoping for a dramatic drop in rates, well, investing in a stress ball might be the next best thing—along with a yacht, if you plan to play the variable-rate game.

Now, it’s not all bad news. U.S. banks are positively dancing with joy, thanks to Trump’s tax cuts and deregulation, and Canadian banks with major U.S. operations are also benefiting. BMO, TD, and Scotiabank are already eyeing fatter profits, while their Canadian customers are left staring at rising rates with a sense of impending doom.

The Impact of USA’s economic uncertainty on Canada’s mortgage market

The economic uncertainty in the United States can have significant and multifaceted effects on Canada’s mortgage market. While the two countries are separate economies, they are closely intertwined due to their trade relationship, shared border, and financial market linkages. Here are some of the key impacts that U.S. economic uncertainty could have on Canada’s mortgage market:

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As we’ve established in preview blogs; economic uncertainty in the United States can have a major impact on Canada’s mortgage market. Although the U.S. and Canada are separate economies, they are intricately connected through trade, a shared border, and financial ties.

Key implications U.S. economic uncertainty could affect Canada’s mortgage market.

Let’s identify the ones that matter today, now and tomorrow:

1. Interest Rates and Monetary Policy

• Indirect Influence on Canadian Rates: The U.S. Federal Reserve’s monetary policy decisions often influence the Bank of Canada (BoC) policy. For example, if the U.S. experiences economic uncertainty (such as a recession or market volatility), the Fed may lower interest rates to stimulate the economy. This could put pressure on the BoC to follow suit to keep Canadian rates competitive and prevent a sharp currency depreciation (since lower rates in the U.S. could make U.S. assets more attractive relative to Canadian ones).
• In HuronMortgages.ca English: U.S. economic uncertainty can cause volatility in global financial markets, influencing investor sentiment. If investors flock to safe-haven assets like U.S. Treasuries, Canadian bond yields may rise, which could lead to higher mortgage rates in Canada, even if the domestic economy stays stable.

2. Exchange Rate and Housing Market

• Currency Fluctuations: U.S. economic instability often leads to fluctuations in the value of the Canadian dollar. A weaker Canadian dollar, which may result from a U.S. downturn or risk aversion, can make imported goods more expensive and increase inflationary pressures. This could push the Bank of Canada to raise interest rates, which would affect mortgage affordability in Canada.
• In HuronMortgages.ca English: U.S. economic uncertainty can cause volatility in global financial markets, influencing investor sentiment. If investors flock to safe-haven assets like U.S. Treasuries, Canadian and U.S bond yields may rise, which could lead to higher mortgage rates (both fixed and variable) in Canada, even if the domestic economy stays stable.

3. Housing Prices and Affordability

• Impact on Housing Prices: U.S. economic uncertainty can affect the Canadian housing market in diverse ways. In a scenario where the U.S. is facing a downturn, Canadians might delay home purchases, which could slow down home price appreciation or even lead to price corrections in certain areas. On the other hand, if Canadian housing markets are seen as a more stable place to park capital during U.S. economic instability, this could drive demand and push prices higher.
• Affordability Issues:  If Canadian mortgage rates rise due to higher bond yields or the Bank of Canada raising interest rates in response to U.S. actions or inflation, home affordability could worsen. In markets like Toronto and Vancouver, where housing prices are already high, the combination of rising rates and prices could make homeownership even more out of reach for many buyers.

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4. Real Estate Market Volatility

• When the U.S. economy gets shaky, investors often look for a “safe space” – and, Canadian real estate is like the cozy blanket of the investment world. So, if U.S. investors start eyeing Canadian properties as a safer bet, demand goes up, prices soar, and suddenly, the dream of owning a home in Toronto or Vancouver feels more like a fantasy. Meanwhile, Canadian buyers are left trying to compete, all while their mortgage payments climb higher. It’s like a game of musical chairs, but with more bidding wars and fewer chairs. 
• Translation:  Waiting is not a great strategy.

In short, U.S. economic uncertainty can ripple through Canada’s mortgage market in multiple ways, affecting interest rates, investor behavior, housing demand, and consumer confidence. Though Canada has its own economic dynamics, the close relationship between the two countries means that U.S. economic shocks can impact everything from home affordability to mortgage default risk. The full effect depends on how the Bank of Canada responds, how Canadian consumers and businesses react, and the specific nature of the U.S. economic turmoil.

If there’s ever a pocket to purchase, refinance or expand your portfolio; you’re currently in it.  This pocket may exist for a few weeks or a few months.  A lot of us have waited over two years to get to these rates.  Maybe it’s time to ‘buy the dip’.