How Could Election Promises Impact Canadian Mortgage Rates?

Election time in Canada often comes with bold promises, economic plans, and plenty of speculation. But beyond the headlines, these promises can shape the conditions that directly or indirectly influence mortgage rates. With housing affordability dominating political debates and rising mortgage costs squeezing homeowners, understanding how the next government’s fiscal choices might affect rates has never been more important.
Let’s unpack what each major party is proposing, how their policies might influence inflation and interest rates, and what all this means for your mortgage.

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Liberal Promises: Spending to Support Growth and Affordability

The Liberals are leaning into targeted spending to fuel long-term economic growth and affordability. Their plan includes:

• Cutting the lowest federal income tax bracket from 15% to 14%, giving households extra breathing room
• Investing in AI, infrastructure, and national defence to future-proof the economy
• Creating a $6 billion National Housing Affordability Fund
• Removing GST on homes valued under $1 million
• Expanding first-time homebuyer incentives

This strategy aims to boost productivity and supply while also shielding Canada from external economic shocks like U.S. instability. In theory, higher productivity and smarter trade could ease inflation over time—opening the door for lower mortgage rates.

But there’s a catch. In the short term, government spending—no matter how strategic—could stoke inflation. If inflation rises faster than expected, the Bank of Canada may have no choice but to hold or raise interest rates, keeping mortgage costs elevated.

Conservative Promises: Discipline, Housing Supply, and Fiscal Restraint

The Conservative platform takes a very different route. Their focus is on:

• Unlocking federal land for housing
• Fast-tracking building permits and density incentives
• Cutting government spending to balance the budget in five years
• Prioritizing market-led supply growth over government intervention

The goal is to reduce home prices through increased supply while cooling inflation through fiscal restraint. If spending is curtailed and supply ramps up, inflation may ease faster, giving the Bank of Canada more room to cut rates.
However, if housing construction doesn’t move fast enough, supply shortages could persist, keeping prices high and affordability out of reach. And if spending cuts delay critical infrastructure or climate investments, the long-term risks—like higher insurance premiums or supply disruptions—could also keep inflation stubborn.

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The Bank of Canada: The Real Rate Setter

Regardless of which party wins, it’s important to remember: the Bank of Canada—not politicians—ultimately decides mortgage rates through its policy rate. But what does change post-election is the fiscal environment the Bank responds to.
If government policy fuels inflation, the Bank may hold or raise rates. If inflation cools due to tight spending or improved productivity, the Bank could lower rates, easing mortgage costs. The Bank also watches:

• Monthly inflation numbers
• GDP growth
• Bond yield trends (which affect fixed rates)
• Global trade tensions, especially with the U.S.

These economic signals determine whether rates go up, down, or hold steady.

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What It Means for You: Mortgage Strategy Ahead of the Election

So, what should you do as a buyer, homeowner, or someone approaching a mortgage renewal?

Election promises don’t set rates, but they can set off a chain of events that influence them. If you’re risk-averse and expect spending-heavy policies to win, locking in a rate now might protect you from a rise in borrowing costs. If you think supply-side solutions and fiscal tightening will prevail, variable rates may trend lower in the future—meaning flexibility could save you money.
Now’s a smart time to reassess your mortgage strategy. Speak to an expert, compare rates, and understand how your financial profile lines up with what lenders are offering.

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Final Thoughts: Beyond the Ballot Box

No party can promise mortgage rate cuts—but their policies create the economic backdrop the Bank of Canada works within. Smart investments can tame inflation and support lower rates, but delayed action or poor planning can have the opposite effect.

“To explore how campaign pledges may influence rates over the coming year, check out our updated breakdown on how election promises could shape the 2025 mortgage landscape.”

Whether you’re buying your first home or navigating a renewal, paying attention to election platforms is more than just politics—it’s about your long-term financial health.

What first-time home buyers need to know or you can Connect with a Mortgage.Expert advisor to discuss your options before the next rate announcement or election outcome shifts the landscape.