We are definitely in an economic time that we haven’t seen before and just when we think mortgage rates and the real estate market are normalizing after the pandemic, we get the Trump tariff shake up. In a nutshell what it means more than anything is that we are in new territory with an unpredictable administration down south and it’s unclear when and how it will impact our economy.
I have been on calls all week with different economists and analysts trying to see how exactly we will be affected and the best summary I have found so far comes from Rob McLister of Mortgage Logic News. I love the way he explains things;
“Trump’s “30 day period to see whether or not a final Economic deal with Canada can be structured,” implies a lot more negotiating ahead. And bargaining with this administration resembles a reality show where contestants win by applauding the host’s haircut. Investors will keep this uncertainty priced into yields until the coast is clear with tariffs.
“The good news is that Trump’s threats will make Canada’s economy stronger. Whoever wins the next election will start setting the stage to ensure the U.S. never wields this much control over our economy again. Politicians will diversify trade partnerships, reduce interprovincial trade barriers, invest in manufacturing and tech, promote “Buy Canadian,” and improve energy transportation.”
Yesterdays report from MLN seems fairly confident that we will come through this strongly and the benefit to homeowners and home buyers will be lower rates as the Bank of Canada will respond quickly to ensure we are not pushed too far into a recession. That said, if they drop rates too quickly and trigger too much household spending and inflation gets out of hand again, we know that they are not scared to hike rates just like they did in 2022 so it’s a bit of a balancing act.
Today’s report came in from former BoC governor Stephen Poloz and he fears that our economy will be less resilient if the tariffs are imposed and that our economy is much weaker than it appears. He feels that if the tariffs are enforced that it will have much more drastic negative measure on our economy than the pandemic did.
So it’s a bit of a wait and see…however if you are in the market today for a new mortgage or to refinance or renew, do a bit of a financial health check to see where you are at and get advice from a professional on your mortgage before locking into anything.
- Look at your 3-5 year plan
- Will you have secure income for the next 3-5 years?
- Do you foresee a potential move for any reason within 3-5 years?
- Will you have increased debt in the next 3-5 years?
- Do you have equity in your home if you need to refinance in an emergency?
- Do you have any savings or assets to fall back on to weather a financial storm?
- What is your risk tolerance? Can you handle rising payments if the Variable Rate goes up again?
Since Monday, the bond markets have fallen substantially which has already resulted in lower interest rates this week with expectations that we will continue to see them come down. We will most likely see another cut at our next BoC meeting on March 12 which will be a bit sooner than what was initially thought last week.
So when in doubt, don’t hesitate to call or connect with me. We are watching this daily and will keep you updated so stand by. CLICK HERE to book a call if you want to review and discuss your personal situation. |
