Mortgage Basics #Featured articles
Mortgage Basics #Featured articles
How Trump’s Tariffs Could Impact Canadian Mortgage Rates

Table of contents
Shifting trade policies and international alliances reshape the global economy and supply chains, creating challenges and opportunities for Canadians and their homeownership costs. Canada faces significant challenges marked by the potential for rising tariffs and heightened trade barriers, especially for homeowners navigating mortgage costs. Tariffs could be imposed as early as February 1st, adding urgency to economic concerns. Understanding these changes is crucial for Canadians seeking to tariff-proof their mortgage strategy.
Key Takeaways
- Higher inflation and tariff-driven economic uncertainty could lead the Bank of Canada to hold or raise interest rates.
- Increased volatility may prompt lenders to adopt stricter mortgage qualification criteria.
- Canadians can benefit from early mortgage renewal or refinancing, locking competitive rates before potential hikes.
Understanding the Economic Risks of Tariffs
In a world with increased tariffs, the global environment is expected to be marked by protectionist trade policies, increased tariffs, and renegotiated trade agreements. Such policies disrupt global trade flows and force countries like Canada to adapt by diversifying trade partners, modifying supply chains, and promoting domestic production.
How Tariffs Could Drive Canadian Mortgage Rates Up
With tariff-centric policies from Canada’s biggest trading partner, homeowners must be prepared for rapidly changing mortgage conditions. Here’s how tariffs might impact your mortgage:
Rising Interest Rates
As inflation surges due to higher import costs, the Bank of Canada may respond by raising interest rates. This directly affects variable-rate mortgages (VRMs) by increasing their interest-carrying costs and adjustable-rate mortgages (ARMs) by increasing monthly payments for many borrowers. Additionally, fixed-rate mortgage options could become less affordable, leading more Canadians to lock in rates sooner rather than later.
According to Oxford Economics, retaliatory tariffs could slash Canada’s GDP by 2.5% by early 2026, with inflation peaking at 7.2% and unemployment potentially rising to 7.9%. For homeowners, these economic conditions signal a pressing need to secure stability and predictability with their mortgage terms.
Stricter Lending Standards
Economic instability often leads lenders to tighten mortgage approval criteria. Borrowers may face increased scrutiny, including higher credit score requirements and larger down payments, as tighter lending criteria could prompt lenders to adopt stricter mortgage qualification rules. Experts recommend a mortgage pre-approval and flexible mortgage products to mitigate these challenges.
Housing Affordability Challenges
As borrowing costs rise, affordability could worsen significantly. Prospective home buyers may find it harder to enter the market, while current homeowners face potential “payment shock” during renewals. With approximately 1.2 million mortgages set for renewal in 2025, this represents one of the largest renewal waves in recent history. Many of these mortgages were secured during historically low interest rates, and borrowers now face the challenge of significantly higher rates upon renewal. This shift could increase monthly payments and financial strain, making early preparation and a solid mortgage strategy critical for affected homeowners. Locking in a rate now could offer some financial stability.
Alternatively, borrowers might consider a mortgage prequalification, a quick, informal assessment based on self-reported information like income and debts. Unlike preapproval, prequalification doesn’t commit borrowers to a rate and may be more flexible in a moderating rate environment.
Why Act Now:
- Competitive Rates Won’t Last: Locking in a fixed-rate mortgage now could shield you from future rate increases.
- Market Volatility is Ongoing: Prolonged tariff disputes and economic uncertainty could disrupt future mortgage trends.
- Refinancing Opportunities: Refinancing before mortgage rates climb could help lower your monthly payments or access home equity.
We’re curious…
Practical Steps for Homeowners
- Consult a Mortgage Expert: Develop a personalized mortgage strategy for your unique needs and circumstances with an experienced professional.
- Lock in a Rate Early: Don’t wait for rates to spike—secure a favourable rate now.
- Consider Fixed vs. Variable Options: Assess whether a fixed or variable rate aligns better with your financial goals.
Impact on Lending Standards
Increased economic volatility could result in stricter lending standards. Banks and lenders may require higher credit scores, larger down payments, and more robust financial documentation to mitigate risks. As a result, securing mortgage pre-approvals could become more challenging for first-time homebuyers and those with lower credit scores.
Housing Affordability Challenges
Rising interest rates and inflation may worsen housing affordability. Prospective buyers could face higher borrowing costs, while current homeowners might struggle to refinance or access home equity. If rates have significantly increased, those nearing the end of their mortgage term could also experience renewal payment shocks.
Approximately 1.2 million Canadians are set to renew their mortgages in 2025. Many of these mortgages were secured when interest rates were at historic lows, closer to 2%. However, renewing in the current higher-rate environment could increase monthly payments, causing homeowners to experience ‘payment shock.’ To mitigate this, experts recommend starting the renewal process early, shopping around for the best rates, and considering more extended amortization periods to lower monthly payments.
Despite a recent stellar jobs report, market uncertainty remains. Canada’s bond market is now pricing in only one full rate cut this year, with a slightly higher chance of a 25 bps (0.25%) cut to the policy rate at the upcoming Bank of Canada meeting on January 29th.
Is Fixed or Variable Best for Your Financial Circumstances?
Selecting the right mortgage type—fixed or variable—depends on your financial situation, risk tolerance, and cash flow flexibility.
Fixed-Rate Mortgages
A fixed-rate mortgage is a wise and easy choice if you prefer predictable, stable payments and have limited budget flexibility. It protects against potential interest rate hikes driven by economic factors like tariffs or inflation, offering peace of mind with consistent monthly payments.
Variable-Rate Mortgages
A variable-rate mortgage can be a smart option for those comfortable with some level of risk and with enough financial flexibility to manage changing payments. While initial rates may be lower, payments could fluctuate based on future interest rate changes. Borrowers who can handle this uncertainty may benefit from cost savings in the shorter term.
The right mortgage choice is based on your financial goals, current cash flow, and willingness to manage potential payment volatility. Fixed rates suit those prioritizing stability, while variable rates offer opportunities for those open to risk and with financial room to navigate changes.
High interest rates got you stressed?
Find your low rate refinance with nesto today
Frequently Asked Questions (FAQ) on Trump Tariffs Impacting Canadian Mortgage Rates
How do tariffs affect mortgage rates?
Tariffs can lead to higher inflation, prompting the Bank of Canada to raise interest and mortgage rates.
Will mortgage rates rise significantly with higher tariffs?
While predicting exact changes is complex, economic instability and inflationary pressures could lead to higher borrowing costs.
Should I lock in a fixed-rate mortgage before potential tariffs take effect?
Given potential interest rate increases, locking in a fixed-rate mortgage may offer financial stability.
Final Thoughts
A world shackled by tariffs demands proactive mortgage planning. Tariffs, combined with resurgent inflationary pressure, could drive up borrowing costs, making it essential for homeowners and buyers to stay ahead of market changes.
With competitive rates still available, now is the time to act. By consulting with nesto mortgage experts, you can develop a tailored mortgage strategy that protects you from future rate hikes. Whether considering a new mortgage, refinancing, or renewal, locking in a favourable rate today could ensure longer-term financial stability.
Take control of your mortgage strategy by consulting nesto mortgage experts today, and lock in a competitive rate before market conditions change.
Why Choose nesto
At nesto, our commission-free mortgage experts, certified in multiple provinces, provide exceptional advice and service that exceeds industry standards. Our mortgage experts are non-commissioned salaried employees who provide impartial guidance on mortgage options tailored to your needs and are evaluated based on client satisfaction and advice quality. nesto aims to transform the mortgage industry by providing honest advice and competitive rates using a 100% fully digital, transparent, seamless process.
nesto is on a mission to offer a positive, empowering and transparent property financing experience – simplified from start to finish.
Contact our licensed and knowledgeable mortgage experts to find your best mortgage rate in Canada.
Ready to get started?
In just a few clicks, you can see our current rates. Then apply for your mortgage online in minutes!