UPDATE 3/6/25: Just as I was about to send this apparently Trump has paused the tariffs to Mexico and now Canada until April 2. Good grief….how does anyone keep up with this…either way here are some tips below if he is back at it next month on how to handle your mortgage and potentially take advantage of falling rates.
On Tuesday, March 4, 2025 Trump has imposed tariffs of 25% on goods coming from Mexico and Canada, 10% on Canadian energy, and an additional 10% on goods from China and has since already scaled back on 3 automotive suppliers. Canada has come back with retaliatory tariffs and now we end up in a trade war with the US. There is so much debacle with the entire Trump administration, it’s mind blowing that this is where we are in todays day and age.
Over the last few days we’ve seen a wild ride in the stock markets and as a result the bond market has fallen which directly affects fixed mortgage rates. We have not seen the bond market this low since mid 2022. We have also had multiple economists report yesterday and today that the Bank of Canada will respond with additional rate cuts to the overnight target rate (which affects the Prime rate) and now expected that we will see 4 more cuts by July of this year with the first one next week.
How does this affect mortgage holders;
- New Mortgage Borrowers: This will allow you to qualify for slightly larger mortgages and give lower payments in either a Variable Rate Mortgage or Fixed Rate Mortgage as rates drop
- Existing Variable Rate Mortgage Borrowers: This will lower your mortgage rate when Prime comes down and in some cases lower mortgage payments.
- Existing Fixed Rate Mortgage Borrowers: Potential opportunity to reduce your current rate by either Refinancing your mortgage or Switching your mortgage to a new lender at a lower interest rate improving your cash flow.
- Although lower mortgage rates are usually a positive thing for home owners, buyers and the real estate market in general, this is a very difficult time for our economy. There are so many unknowns and we do not want to repeat what happened during the pandemic years with rock bottom rates and then a rate spike.
- Although lower rates generally equal lower payments, this is a time to build up your savings and not to overspend
- Even though home buyers may qualify for more, be very aware of not over extending to protect your financial future
- If you are Refinancing or Switching to get a lower rate, try and leave your current payment the same so that you are paying your mortgage and interest down that much faster
- Be reminded that during the pandemic, many people maxed out their budgets with low mortgage payments and had excessive cash which was used to overspend in many cases in housing and consumer spending in general. Be very careful not to get caught in that trap.
- This drove up inflation substantially which ultimately caused the Bank of Government to increase rates in a short period of time putting a massive strain on many households financially due to rising mortgage payments
So in summary, while we may see lower rates over the course of this year, be very diligent with your spending habits right now as we see how everything will unfold with our borders and overall economy.
Now more than ever is the time to get your finances in order to prepare and plan. To get started and put a plan in place, contact me directly at 604-729-7940.
We are watching this daily and I will have an update out next week with the Bank of Canada’s next rate announcement on March 12, 2025.