Newsletter Subscribe
Enter your email address below and subscribe to our newsletter
Trump’s Tariff Threats Are Making Canadian Mortgage Rates Volatile — What You Should Know
Share your love
Just when Canadians thought mortgage rates might finally start settling, new uncertainty is on the horizon. And this time, it’s not coming from the Bank of Canada — it’s coming from Washington.
Former U.S. President Donald Trump’s aggressive stance on tariffs has made a comeback, and even though Canada narrowly avoided a 25% tariff hike this month, the 30-day delay has only extended the uncertainty. That means mortgage rates — especially fixed and variable rates — could remain volatile for months to come.
Let’s break down why Canadian mortgage borrowers should be paying close attention to U.S. trade policy, how these tariffs can shake our economy, and what you can do to stay one step ahead.
Short-Term Relief, Long-Term Uncertainty
Trump’s decision to delay tariffs on Canadian and Mexican imports may have bought a little time, but it hasn’t restored market confidence. Businesses, banks, and investors are still bracing for more economic disruption — and unfortunately, Canada is right in the blast zone.
Trade disputes disrupt supply chains, increase import costs, and fuel inflation. This uncertainty doesn’t just affect manufacturers — it ripples into consumer prices, mortgage interest rates, and even how the Bank of Canada sets its policy decisions.
🌍 How U.S. Tariffs Influence Canadian Mortgage Rates
Even though the Bank of Canada sets its own policy, American trade decisions — especially tariffs — often ripple across the border. Here’s a breakdown of how U.S. tariffs can indirectly raise or lower your mortgage rate in Canada.
📦 1. U.S. Tariffs Trigger Global Market Volatility
Tariff hikes on imports like steel or electronics spark uncertainty and slow international trade, weakening investor confidence.
💸 2. Global Investors Flee to Safe Bonds
Nervous investors pile into U.S. and Canadian government bonds. This demand pushes bond yields down — a key ingredient in how fixed mortgage rates are priced.
📈 3. Tariffs Drive Up Consumer Prices
Imported goods become more expensive, which may increase inflation. This can pressure the Bank of Canada to raise rates to stabilize prices.
🏦 4. Mortgage Rates React Accordingly
If bond yields drop due to fear, mortgage rates may fall. But if inflation spikes, rates could rise. Tariff timing and severity matter a lot.
📌 Summary: U.S. tariffs can affect Canadian fixed mortgage rates in two ways — through falling bond yields (rate cuts) or rising inflation (rate hikes). It all depends on market reaction and Bank of Canada policy response.
How U.S. Trade Drama Could Affect Canadian Borrowers
Here’s what’s happening behind the scenes when tariffs are on the table:
1. Inflation Pressures Could Push Rates Up
When tariffs make goods more expensive — especially imports — inflation can rise. That makes it harder for the Bank of Canada to cut interest rates, even if the economy is slowing. Higher inflation means mortgage lenders may offer less generous discounts on fixed rates, especially if they expect bond yields to rise.
2. The Loonie Is Getting Weaker
The Canadian dollar tends to weaken when our economy is under pressure or when foreign investors get nervous. A weaker loonie makes imports costlier, which again adds to inflation and creates pressure on BoC to tread carefully with rate cuts.
3. Business Investment Is Slowing Down
With trade policy up in the air, Canadian businesses aren’t taking big risks. That pullback can slow down economic growth and reduce job creation — both of which are critical for a healthy housing market.
📉 According to the Canadian Chamber of Commerce, new tariffs could cost the average Canadian household an extra $1,900 a year.
Mortgage Rates Are Already Moving
Even before tariffs are officially implemented, Canadian bond markets are responding.
The two-year Canadian bond yield — a key indicator for fixed mortgage rates — recently dropped to its lowest level since April 2022. That’s a clear signal: markets are betting the Bank of Canada will start cutting rates more aggressively to fight an incoming economic slowdown.
Money markets are already pricing in a 25-basis-point rate cut at the next Bank of Canada announcement in March. Some economists are even suggesting emergency cuts could happen between meetings if trade tensions spike.
📊 Canada’s Policy Rate vs 5-Year Fixed Mortgage Rate (2022–2025 Forecast)
This chart shows how closely Canada’s 5-year fixed mortgage rates track the Bank of Canada’s overnight rate, with 2025 projections based on inflation and GDP outlooks.
| Year | BoC Policy Rate | Avg. 5-Year Fixed Rate |
|---|---|---|
| 2022 | 1.00% → 4.25% | 3.69% → 5.89% |
| 2023 | 4.50% → 5.00% | 5.39% → 5.64% |
| 2024 (YTD) | 5.00% → 4.75% | 5.64% → 5.24% |
| 2025 (Forecast) | 3.75% → 3.00% | 4.99% → 4.35% |
📌 Insight: Mortgage rates tend to lag behind policy rate moves — but with less volatility. If the BoC cuts in 2025, fixed rates are expected to follow cautiously.
So… What’s Next for Mortgage Rates in Canada?
There are two main paths mortgage rates could follow in the months ahead:
Path 1: Rates Fall Further (Short-Term Relief)
If trade tension leads to lower economic growth, we could see:
- Further BoC rate cuts (possibly below 3%)
- Lower variable mortgage rates
- Falling bond yields supporting cheaper fixed mortgage rates
Already, some lenders have dropped fixed rates by 20 basis points, with several insured and uninsured rates approaching the 4% mark — the lowest in recent years.
Path 2: Inflation Roars Back (Long-Term Risk)
If tariffs send prices soaring, the Bank of Canada could be forced to pause or reverse rate cuts to contain inflation. That could lead to:
- Higher long-term fixed rates
- Lenders increasing risk premiums
- Renewed affordability pressures for buyers and renewers
It’s a balancing act: support growth without letting inflation run wild.
What You Should Do Right Now
Canadian mortgage borrowers don’t need to panic — but they do need to prepare.
Whether you’re shopping for your first mortgage, renewing, or thinking about refinancing, here’s how to stay ahead:
- Keep an Eye on the BoC: Rate decisions will likely come faster and more frequently than usual. Volatility means timing matters.
- Run the Numbers With a Broker: Locking in a rate now could shield you from inflation-driven hikes — but staying variable might pay off if cuts continue.
- Consider a Hybrid Mortgage: Some lenders offer mortgages that split between fixed and variable, giving you both protection and flexibility.
- Watch the Bond Market: Fixed rates move with bond yields — and right now, those are sliding fast.
📊 Fixed vs Variable Mortgage Strategy During Tariff Volatility
When trade tensions flare up — like U.S. tariffs on Canadian goods — market volatility and inflation spikes can quickly impact borrowing costs. Here’s how fixed and variable mortgages respond differently, and which strategy may suit your situation.
🔒 Fixed-Rate Strategy
- ✅ Locks in your rate and payment stability for 5 years
- 🛡️ Best if tariffs lead to inflation and future rate hikes
- 📉 No benefit if BoC cuts rates in response to a downturn
- 📅 Good for buyers with long-term plans and stable income
- 💲 May come at a slightly higher upfront cost
📉 Variable-Rate Strategy
- 💰 Starts with a lower interest rate
- 🔀 Risky during inflationary tariff events or supply chain shocks
- 📉 Offers flexibility if BoC cuts rates due to recession fears
- ⚠️ Rates could climb quickly if tariffs cause price spikes
- 💼 Ideal for aggressive repayment plans or short-term stays
📌 Pro Tip: If you’re uncertain, a hybrid mortgage (part fixed, part variable) could balance protection with flexibility during volatile trade periods.
Key Takeaway: Uncertainty Is the Only Constant
Even if Trump’s tariff threats don’t materialize right away, the fear of them is already reshaping markets — and Canadian mortgage borrowers are feeling it.
We’re in an unusual moment: rates are dropping, but uncertainty is rising. That means the right mortgage strategy isn’t just about chasing the lowest rate — it’s about choosing the right product for your personal financial stability and risk comfort.
Whether the next Bank of Canada move is a rate cut or a rate freeze, you’ll be in a stronger position if you plan ahead.
Need a Plan? Let’s Talk.
At Mortgage.Expert, we’re here to help you build a strategy that keeps you steady — no matter how wild the global economy gets. Our independent mortgage experts work with leading lenders across Canada to get you competitive rates and flexible terms.
→ Get personalized advice now
→ Compare today’s lowest fixed and variable rates
→ Lock in a rate before market conditions shift again
