The recent decision by the U.S. government to impose a 25% tariff on Canadian imports, along with a 10% tariff on energy, has sent ripples through the Canadian economy. While the long-term effects remain uncertain, economists widely agree that these tariffs could lead to a recession, job losses, and a decline in GDP.

For Canadian homeowners and prospective buyers, this economic uncertainty raises critical questions: How will the tariffs impact mortgage rates? Is now the right time to buy or refinance? What steps can borrowers take to protect themselves?

At GLM Mortgage Group, we understand the challenges facing homeowners and buyers in these volatile times. With our expert guidance, we can help you navigate the changing mortgage landscape, ensuring you secure the best financing options available.

The Immediate Economic Impact of Tariffs

The implementation of tariffs has already begun to affect the Canadian economy. The government has retaliated with its own tariffs on U.S. goods, leading to increased tensions between the two nations. This economic strain is expected to have the following consequences:

• Rising Inflation: Higher import costs mean Canadians will pay more for goods and services, straining household budgets.
• Job Losses: Industries reliant on U.S. exports may face layoffs, increasing the unemployment rate by as much as 2-3%.
• Weaker Canadian Dollar: The loonie is expected to decline in value, making international goods more expensive and further driving inflation.
• Slower Economic Growth: With a potential recession looming, Canada’s GDP could shrink by up to 4.2%, reducing overall economic activity.

These factors create a challenging environment for those considering homeownership or mortgage refinancing. However, understanding how the market is reacting can help borrowers make informed decisions.

How Tariffs Are Affecting Mortgage Rates

While economic downturns generally signal negative consequences, they can also create opportunities for borrowers. In response to the tariff announcement, financial markets have seen a significant shift:

1. Declining Bond Yields and Fixed Mortgage Rates

Investor uncertainty has led to a flight to safety, with money flowing into government bonds rather than stocks. This has caused Canadian bond yields to drop, leading to lower fixed mortgage rates.

Currently, the five-year fixed mortgage rate in Canada has decreased to 3.89%, making it an attractive option for buyers. However, bond yields remain volatile, and rates could rise again as markets adjust to the new economic reality. If you’re considering a fixed mortgage, locking in a low rate now could save you thousands over the life of your loan.

2. Potential for Lower Variable Mortgage Rates

Before the tariff decision, the Bank of Canada (BoC) was planning a slow and steady reduction in interest rates throughout 2025. However, the economic uncertainty caused by tariffs may force the BoC to accelerate rate cuts to stimulate the economy.

BMO economists predict that the central bank could lower its benchmark rate to 1.5% by the end of the year, a level not seen since mid-2022. This would translate to lower variable mortgage rates, providing relief to borrowers who are comfortable with some market risk.

At GLM Mortgage Group, we closely monitor these trends to ensure our clients access the best mortgage products tailored to their financial goals.

Inflation and the Canadian Dollar: What It Means for Homebuyers

The weakening Canadian dollar poses another challenge for homeowners and buyers. A lower exchange rate increases the cost of imported goods, driving inflation higher. The Bank of Canada has warned that these tariffs will lead to a “one-time, permanent increase in price levels,” meaning the cost of living will rise across the board.

For those considering homeownership, this makes securing a mortgage at the lowest possible rate even more crucial. While wages may struggle to keep pace with inflation, locking in an affordable mortgage can provide financial stability in uncertain times.

How Will the Housing Market Respond?

Before the tariffs, Canada’s real estate market was poised for a strong 2025. The Canadian Real Estate Association (CREA) had forecasted an 8.6% increase in home sales and a 4.7% rise in home prices, driven by pent-up demand and lower mortgage rates.

However, the introduction of tariffs has introduced uncertainty. There are two possible scenarios:

1. A Market Slowdown: If job losses increase and consumer confidence declines, housing demand could weaken, leading to slower home price growth.
2. A Housing Boom Due to Lower Rates: If the government introduces stimulus measures and mortgage rates fall below 2%, we could see a repeat of the 2020-2022 housing frenzy, where historically low rates fueled a surge in demand.

Regardless of how the market plays out, homebuyers and homeowners need expert guidance to navigate these changes. This is where GLM Mortgage Group comes in.

Why GLM Mortgage Group Is Your Best Partner in Uncertain Times

In an ever-changing mortgage market, working with a knowledgeable mortgage broker is more important than ever. At GLM Mortgage Group, we provide our clients with the insights and strategies needed to make sound financial decisions. Here’s how we can help:

✅ Rate Lock Protection: We help you secure the lowest available rate before market conditions change.
✅ Personalized Mortgage Strategies: Whether you’re a first-time buyer, looking to refinance, or renewing your mortgage, we find the best solution for your financial goals.
✅ Access to Multiple Lenders: Unlike banks that offer limited options, we work with a variety of lenders to find the most competitive rates and terms.
✅ Expert Advice on Economic Trends: We monitor market fluctuations and provide proactive recommendations to help you make informed decisions.

Final Thoughts: Stay Ahead of the Market with GLM Mortgage Group

The U.S. tariffs have created a complex economic landscape, but they also present opportunities for Canadian homebuyers and homeowners. With mortgage rates currently trending lower, now is a strategic time to explore your financing options.

At GLM Mortgage Group, we are committed to helping you navigate these changes with confidence. Whether you’re looking to buy, refinance, or renew your mortgage, our expert team is here to guide you every step of the way.

Don’t let economic uncertainty hold you back. Contact GLM Mortgage Group today and let’s secure the best mortgage solution for your future!

Call us now for a free consultation!
Visit our website to get started!

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• Forward-looking sales indicators have collapsed. Many businesses referred to elevated uncertainty. Still, roughly half of firms anticipate that their sales will recover to pre-pandemic levels within the next year.
• Businesses in most regions and sectors intend to cut their investment spending significantly. Hiring plans are muted, although a quarter of firms plan to refill some positions after recent layoffs.
• Reports of capacity pressures and labour shortages have fallen significantly. This suggests a substantial widening in economic slack.
• Expectations for input and output price growth, as well as for overall inflation, are all down considerably.
• Credit conditions have tightened significantly, but government measures are a helpful offset.

BOC CONSUMER EXPECTATIONS SURVEY–Q2 2020

This survey was conducted from May 11 to June 1, in the throws of the ongoing pandemic. Of most concern to consumers was the prospect of losing their jobs. Many believed finding another job would be difficult. As well, consumer expectations for wage growth declined significantly.

According to the survey, consumer expectations for interest rates have fallen sharply, although they expect rates to rise over the 1-year to 5-year horizon, albeit moderately. At the same time, expectations for average house price growth have dropped to zero for Canada as a whole. For Ontario, respondents expect the average home price to rise by 1% over the next year. In BC, people see home prices falling a moderate -0.30%, with Albertan respondents suggesting a price decline of -4.3% (see the chart below). It is important to note that oil prices have risen considerably since the completion of this survey. All of these forecasts are well below the figures in the Q1 study.

It is noteworthy that all of these expectations are well below the CMHC forecast for the national average home price to fall 9%-to-18% over the coming year.

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MORTGAGE INDUSTRY RELATED: 

1. CMHC First Time Home Buyers Incentive Plan
   • This would give first time home buyers the ability to share the cost of buying a home with CMHC
   • For existing homes – the incentive would provide up to 5% (funding/equity sharing) of the PURCHASE PRICE
   • For newly constructed homes the incentive would provide up to 10% (funding/equity sharing) of the PURCHASE PRICE
   • Funding/Equity sharing means that CMHC would cover a percentage of the purchase price
   • Example:
     • 400K purchase price, 5% down payment (20K), AND 5% CHMC shared equity mortgage (20K), the size of the insured mortgage would be reduced from 380K down to 360K, which would lower the monthly payment amount for the first time home buyer
   • To qualify for the program:
     • 120K max household income
     • Cannot borrow more than 4x their annual household income – making max purchase price approx. 505K
     • 100k household income would mean max 400K mortgage in order to use this program.
2. HOME BUYERS PLAN RRSP INCREASE
   • An increase of the previous $25,000 for RRSP withdrawal amount through the Home Buyers Plan to $35,000

These were the only two key changes that came out of the Federal Budget (so far). It provides minimal assistance for First Time Home Buyers, especially in a market like Vancouver and the Fraser Valley, who have home prices well above the 505k purchase price limit. However, it could provide assistance to those looking to purchase condos or townhomes ore in more rural areas. One area that will remain the same for the mortgage industry is the continued B-20 stress testing measures (which have recently come under fire)

The predicted start time is Fall 2019 for these guidelines. We will keep you updated on any new additions or changes as the information becomes available. To read more about the highlights of the 2019 budget, click here. 

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