Are Canadian interest rates about to nosedive?

Justin Prasad, a financial advisor at BlueShore Financial, told Canadian Mortgage Professional that political uncertainty is affecting consumer confidence, similar to what happened during Trump’s 2016 election. While the spring housing market is expected to improve compared to 2024, it may still be sluggish, especially for apartments and townhouses. Prasad noted that the choice between fixed and variable mortgage rates remains challenging. Potential tariffs could drive inflation, but their broader economic impact might lead the Bank of Canada to cut rates further, benefiting variable rates while also pushing fixed rates lower.

Canada has avoided an immediate trade war after Donald Trump paused tariffs on Canadian imports for 30 days, but economic uncertainty remains high. If imposed, the 25% tariffs (10% for energy) could significantly impact Canada’s economy, leading to rising unemployment and a weaker dollar. The Bank of Canada may accelerate rate cuts to counteract potential damage, with some analysts even predicting an emergency cut. Falling bond yields suggest both fixed and variable mortgage rates could decline. However, despite lower borrowing costs, housing market growth is expected to be slow due to economic concerns. Experts advise mortgage borrowers to choose between fixed and variable rates based on their risk tolerance rather than trying to predict the market. While some believe a prolonged trade conflict is unlikely, Canada’s economic stability depends on securing tariff exemptions and maintaining strong US relations.