What Mark Carney’s Liberal Win Means for Your Mortgage Strategy in 2025

“So… Mark Carney just became the new face of the Liberals. But what does that have to do with your mortgage?”
Actually, quite a bit. His economic background could influence interest rates, affordability programs, and your best move heading into 2026.

Mortgage Rates and Politics: What’s the Link?

You might not think politics and your mortgage rate have much in common — but in Canada, they absolutely do. When a new government comes to power, especially with big spending plans or economic reforms, it can shift market expectations almost overnight. And that affects interest rates, inflation, and the decisions made by the Bank of Canada.

With Mark Carney’s Liberal party now forming a minority government, we’re already seeing new conversations around how much the government will spend to stimulate the economy. And as you might’ve guessed, more spending often leads to higher inflation, which means the Bank of Canada might slow down or pause expected rate cuts — a move that directly affects homeowners, first-time buyers, and anyone shopping for a mortgage.

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Why Fixed vs. Variable Still Isn’t a Simple Choice

Right now, we’re in a unique moment. Variable mortgage rates are actually higher than fixed rates, which is the opposite of what we’ve typically seen over the years.

Many Canadians think, “If rates are expected to fall, shouldn’t I go variable?” But here’s the twist: most fixed-rate mortgages have already “priced in” those expected rate cuts. That means fixed-rate borrowers are already enjoying some of the benefit of those anticipated BoC cuts — even before they happen.

If the new Liberal government boosts the economy with spending, the Bank of Canada may not need to cut as much. In that case, variable rates may not fall much further, and borrowers who chose variable might not see the savings they hoped for.

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How the Market Reacted to Carney’s Win

Even before election night, financial markets were anticipating a Liberal win — and adjusting accordingly. Bond yields began to dip, reflecting softer growth expectations and potential rate cuts in the future.

However, now that the Liberals are officially in power, there’s a mixed outlook. On one hand, they’re expected to inject billions into infrastructure, housing, and innovation. That kind of investment could push up inflation — which normally leads to higher mortgage rates. On the other hand, if that spending leads to greater productivity, it might ease inflation over time, helping rates drop later.

Right now, bond yields are the main driver behind fixed-rate mortgages, while BoC policy rate changes steer variable rates. With Liberal policies likely to affect both in different ways, it’s no wonder Canadians are finding it tough to pick a side.

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Mortgage Advice Based on Your Borrower Type

If you’re not sure whether to go fixed or variable, the answer often depends less on rates — and more on your life situation. Here’s how it plays out:

If you’re a first-time buyer who needs stability and predictable payments, fixed is often the safer choice. You won’t have to worry about sudden rate changes, especially if you’re budgeting tightly.

If you’re renewing your mortgage, you might benefit from going variable — especially if you’re financially flexible and think rates will fall later in your term. Some lenders also offer rate drop clauses, where your fixed rate can be adjusted downward if market rates fall after approval.

And if you’re planning to sell or refinance in the next few years, variable might be your friend — not because of the rate itself, but because of the significantly lower penalty if you break your mortgage early.

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The Variable Penalty Advantage (And Why It Matters Now)

Here’s a trick that many Canadians overlook: Variable mortgages come with a much smaller break penalty. If you exit a fixed mortgage early, your lender calculates the penalty using a formula called the IRD — and it can cost you thousands depending on market conditions.

But variable mortgages? The penalty is usually just three months’ interest. That makes them far more flexible for borrowers who might refinance, upgrade, or move homes before the end of their term.

So even if fixed rates are currently lower, the total cost of borrowing — including the potential penalty — may actually be cheaper with variable.

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Final Thoughts: What Should You Do Next?

Mark Carney’s Liberal win won’t dictate your mortgage rate directly — but it could change the economic playing field in big ways. With inflation still in focus, rate cuts from the Bank of Canada may be more gradual than expected. That means variable rates might not fall as quickly, and fixed-rate deals currently on the table could become even more attractive.

If you’re unsure, don’t guess. Reach out to a mortgage expert who can run the numbers for you — based on your income, plans, and risk tolerance.