Canadian Banks Dodge Worst-Case Tariff Fallout, Mortgage Lending Outlook Steadies

Canadian Banks Beat Trade-War Fears

In their latest earnings results, Canada’s Big Six banks signaled resilience in the face of global trade war uncertainty. Despite tariffs targeting steel, aluminum, and agriculture, the sector has avoided a credit crunch.

• Loan-loss provisions dropped to around C$5.22 billion, down from C$6.37 billion last quarter.
• Net interest income (NII) climbed between 9.3% and 57%, reflecting margin gains as banks passed higher borrowing costs onto customers.
• Collectively, the banks announced more than C$4 billion in share buybacks, sending a clear confidence signal to investors.

Why It Matters for Mortgages

For homeowners and borrowers, these results mean banks are unlikely to pull back aggressively on mortgage lending. With balance sheets stronger than expected, lenders are positioned to:

• Keep mortgage spreads competitive, ensuring rate discounts remain available to qualified borrowers.
• Focus on U.S. expansion and wealth management, diversifying away from Canadian real estate risk.
• Maintain stricter underwriting in trade-sensitive sectors such as steel and aluminum, where income stability is less certain.

Key Numbers at a Glance

Expert Reactions

• Economists say the sector’s ability to absorb tariff shocks reduces the likelihood of systemic stress in Canada’s mortgage market.
• Bank executives highlight that their U.S. growth strategies are helping offset domestic housing market weakness.
• Analysts caution that while near-term risks are lower, a prolonged trade war could still erode household income and test mortgage repayment capacity.

Why It Matters

The fact that Canada’s largest lenders dodged the worst-case trade-war impact offers stability for borrowers worried about tightening credit. Mortgage spreads may remain steady, but households renewing in 2025–2026 still face higher monthly payments, making affordability a central concern.

For now, Canada’s banks are standing firm against global shocks—but for borrowers, the mortgage stress test at renewal is the real hurdle to watch.

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