How To Plan Your Next Mortgage -Canada and U.S. Tariff Challenges

Jan 262 min read

Here's a quick breakdown of what to expect in the economy over the next few weeks and the effects on mortgages and interest rates.

Both Canada and the United States are facing critical economic decisions influenced by the possibility of new tariffs and a trade war.

I've indicated some of the main economic indicators below to get an idea of what mortgage conditions we'll see going forward and some strategies if you're a homeowner or applying for a mortgage.

Canada's Economic Landscape

GDP Growth: November's growth was likely flat, but December could be stronger.
Job Market: Despite some gains, unemployment remains high, suggesting lower rates are needed to stimulate the economy.
Tariff Concerns: If the U.S. imposes tariffs, it could lead to deflationary pressures, possibly prompting further rate cuts.

Important Dates:

Bank of Canada rate decision: January 29th 2025 (Likely a 0.25% decrease)
November GDP data: January 31st 2025

U.S. Economic Outlook

Interest Rates: The Federal Reserve is expected to keep interest rates steady, waiting for clearer signs on inflation and policy direction.
GDP Growth: The U.S. is looking at solid GDP growth for the last quarter of the year.
Tariff Uncertainty: President Trump's potential tariffs on Canada and Mexico could disrupt economic stability.

Important Dates:

GDP figures for the last quarter: January 30th, 2025
PCE data: January 31st, 2025

Tariff Implications

This week, central banks in both countries will navigate through complex economic conditions, with tariffs posing a significant challenge. If tariffs are enacted on February 1st, they could increase costs, leading to market volatility and likely lower interest rates.

Mortgage Strategies

Pay attention to what the central banks decide this week.
If you're up for renewal or in a mortgage application, secure an interest rate and see if you can hold it until things settle. Some banks will let you lock in a rate for up to 120 days.
If we continue to see economic data signalling the economy is slowing in Canada, consider a variable rate to ride the wave down as the Bank of Canada lowers rates.

TL;DR:

Canada might cut rates, and the U.S. is expected to maintain current rates.
Tariffs could cause economic uncertainty and, therefore, rate cuts to stimulate the economy.
Watch this week's economic announcements for clarity.