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How U.S. Tariff Developments Could Impact Your Mortgage in 2025
February 17, 2025
In early February 2025, President Donald Trump announced a 25% tariff on virtually all Canadian imports, with a 10% tariff specifically on energy imports. However, shortly thereafter, both Canada and Mexico reached agreements with the U.S. to delay these tariffs for 30 days, contingent upon increased border control measures to combat drug trafficking.
Despite this temporary pause, on February 10, 2025, President Trump imposed a 25% tariff on all steel and aluminum imports, including those from Canada and Mexico. The threat of additional tariffs on other goods remains, creating an atmosphere of economic uncertainty.
What Does This Mean for the Average Canadian and Mortgage Rates?
The imposition of tariffs can lead to increased production costs, which businesses may pass on to consumers, resulting in cost-push inflation. Unlike demand-pull inflation, which stems from increased consumer demand, cost-push inflation arises from rising costs of production.
The Bank of Canada (BoC) typically raises interest rates to combat demand-pull inflation. However, in the case of cost-push inflation caused by tariffs, increasing rates would further slow economic growth, potentially leading to stagflation—a combination of high inflation and high unemployment. This is something the BoC will want to avoid.
Variable Mortgage Rates: A Flexible Option
Variable mortgage rates are influenced by the BoC's policy rate. If the economy weakens due to tariffs, the BoC might lower rates to stimulate growth, which could result in decreased variable mortgage rates.
In the current climate, a variable rate could be the mortgage ace up a homeowner’s sleeve amid economic uncertainty. They can always switch to a fixed rate, penalty-free, if they get nervous.
Fixed Mortgage Rates: Stability in Uncertain Times
Unlike variable rates that are tied to BoC's policy rate, fixed mortgage rates are tied to bond yields, which can be volatile during economic upheavals. While bond yields might fluctuate in the short term due to tariff-related uncertainties, they could trend downward if the BoC reduces its policy rate to support the economy.
For those who prefer payment stability, a fixed-rate mortgage offers predictable payments, even amidst potential rate changes.
Navigating Your Mortgage Amid Tariff Uncertainty
The evolving trade policies and their economic impacts underscore the importance of personalized mortgage advice. Me and our team at Pinto Mortgage Group are committed to finding the best mortgage solutions tailored to our clients' needs.
We offer competitive rates and transparent, expert guidance to help you make informed decisions in these uncertain times.
Contact me today to explore your options and secure the best mortgage strategy for your situation.
Big Changes to Canadian Mortgages: How the New Rules Are Shaping 2025
January 23, 2025
As of December 2024, Canada’s mortgage rules have undergone major reforms that are already reshaping the housing market. These changes aim to ease the financial strain on homebuyers and homeowners alike, from reducing down payments to making it easier to switch lenders.
Here’s what these updates mean for Canadians today:
What’s New for First-Time Buyers?
The new rules have lowered the barriers to homeownership:
- Lower Down Payments on Homes Up to $1.5M: Buyers can now purchase homes priced up to $1.5M with a smaller down payment. For instance, a $1.5M home now requires just $125K down, compared to $300K previously.
- Longer Amortization Periods: Insured mortgages now offer up to 30-year amortizations, reducing monthly payments and improving affordability.
How Much Can You Save?
Example 1: Down Payment on a $1.5M Home
- Before: $300,000 (20%)
- Now: $125,000 (5% on the first $500K, 10% on the rest). That’s $175,000 less upfront!
Example 2: Monthly Savings on a $500K Mortgage
- A 30-year amortization saves up to $388/month compared to a 25-year term, putting more money in buyers' pockets.
Switching Lenders Made Easier
Refinancing or renewing your mortgage is now simpler:
- No Stress Test at Renewal: Homeowners renewing their mortgages no longer need to qualify at a higher rate.
- Freedom to Shop Around: Without the stress test barrier, it’s easier to find better rates and save on your renewal.
What This Means for 2025
- First-Time Buyers: Lower upfront costs and smaller monthly payments make entering the market more achievable.
- Borrowing Power: New rules increase how much you can qualify for without significantly raising payments.
- Homeowners: Easier switching means more options and savings when renewing or refinancing.
These changes are already making a difference across Canada, particularly in high-demand areas like Vancouver, where affordability has been a key challenge.
If you’re ready to take advantage of these updates or have questions about your options, I’m here to help and will always keep your best interests in mind—whether that means finding you the best rate through me or elsewhere, because your future matters most.
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