Canadians face growing concerns about trade disruptions as US President Donald Trump threatens new reciprocal tariffs. On Thursday afternoon, Trump directed his trade advisors to consider imposing reciprocal tariffs. That’s on a country-by-country basis, even on trading partners, including Canada, with a potential rollout by early April.

Although the 25% tariffs on Canadian and Mexican imports have been paused until March 4, uncertainty remains. If these tariffs take effect, the impact on Canadian mortgage rates, home values, and inflation could be significant. Homebuyers and homeowners should brace for potential shifts in the housing market and economic conditions into 2025.

Trade Uncertainty Will Continue to Influence the Housing Market

Despite temporary pauses, Trump’s trade policy remains a significant risk factor. The upcoming America First Trade Policy review on April 1 and the 2026 USMCA review add to ongoing volatility. The potential for long-term trade disruptions could dampen consumer confidence and impact home affordability on both sides of the border.

How Will the Bank of Canada Respond to Trade Uncertainty?

If the United States implements tariffs, the Bank of Canada (BoC) is expected to cut interest rates further to cushion economic damage. As seen in declining bond yields and a weaker Canadian dollar, future bond markets have already priced in the likelihood of additional cuts. BMO expects the policy rate to dive below the current neutral range, possibly 1.50%.

How Retaliatory Tariffs Could Impact Inflation and Affordability

If Canada retaliates with tariffs on US imports, the cost of essential goods—including food and home construction materials—could rise. A weaker Canadian dollar (potentially below 70 US cents) could further amplify price increases, raising inflation risks and squeezing household budgets.

Which Sectors and Provinces Could See the Biggest Housing Market Impacts?

Not all Canadian provinces will be equally affected. Ontario, Quebec, and Atlantic Canada are likely more vulnerable due to their reliance on manufacturing and trade. Meanwhile, energy-producing provinces like Alberta and Saskatchewan could experience fewer disruptions if Canadian oil and gas tariffs remain lower than those on other goods.

What Role Will Government Policy Play in Supporting Homeowners?

Federal and provincial governments may introduce financial relief strategies if tariffs take effect. Potential responses include subsidies for affected industries, investments in supply chain resilience, and targeted affordability measures for impacted homeowners. The federal government and the Bank of Canada (BoC) are expected to unleash economic support similar to those seen during the pandemic.

However, Canadians must pay for the costs now or later; if the Government of Canada (GoC) decides to support the economy by easing fiscal policy and driving up Canada’s debt, then Canadians may be on the hook later with higher fixed mortgage rates as bond yields climb to entice investors over the long term. The same is true for the Bank of Canada easing monetary policy, as inflation could increase once the BoC goes back to tightening, with higher interest rates to control inflationary pressures.

What Homeowners & Homebuyers Should Expect

Impact on Mortgage Rates in Canada

In the short term, reduced prime rates on variable mortgages could immediately benefit adjustable-rate (ARM) and variable-rate (VRM) mortgage holders, while fixed rates may decline as bond yields initially adjust to the economic shock. Due to heightened interest rate volatility and reduced liquidity, it may be harder to determine when to switch between fixed and variable rates. However, higher risk premiums that mortgage lenders may charge due to the increased risk of unemployment or weakened housing demand may delay the process. 

Home Prices & Construction Costs

Higher construction and renovation costs, driven by increased material prices, could increase newly built home prices, again driving shelter inflation. Due to economic uncertainty, real estate markets in trade-reliant regions may experience slowed growth.

Government Relief Programs & Policy Adjustments

Homebuyers may see updated affordability measures or incentives. Additionally, governments may focus on long-term trade diversification strategies to stabilize the real estate market.

How to Adapt Your Mortgage Strategy Amid Trade Uncertainty

✅ Monitor Rate Trends Before Making a Mortgage Decision

• Variable-rate mortgages may offer savings if rates drop further, but borrowers should be prepared for inflation-driven hikes.
• Fixed-rate borrowers should track bond market fluctuations, as lenders could adjust rates in response to trade developments.

✅ Consider Regional Economic Trends Before Buying a Home

• Homebuyers in trade-sensitive regions (Ontario, Quebec, and Atlantic Canada) should account for potential job market volatility.
• Energy-focused markets (Alberta, Saskatchewan, Newfoundland) may offer more stability.

✅ Plan for Cost Increases in Home Construction & Renovations

• Material costs for home improvements and new builds could rise due to import inflation.
• Consider securing fixed renovation contracts before tariffs take effect.

✅ Leverage Government Support Programs When Available

• If job losses occur, mortgage holders may benefit from government relief programs.
• Watch for new first-time homebuyer incentives, mortgage deferral payment relief, or other mortgage affordability measures.

Preparing for Uncertainty in the Housing Market

While the delay in US tariffs provides temporary relief, Canadian homebuyers and homeowners should remain proactive. With potential BoC rate cuts, rising inflation risks, and regional housing market fluctuations, borrowers must stay ahead of mortgage rate forecasts and adjust their mortgage strategies accordingly.

For expert guidance on mortgage planning amid economic uncertainty, consult with a nesto mortgage expert today.

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