Well a lot has changed in a short amount of time and tariffs are in place as of today. I’m writing with a brief update and outlook.

My biggest message is that when it comes to mortgage rates, things will get better before they get worse – the opposite of what we are poised to see in the economy.

Here are a few key insights from trusted economist sources that I received today:

Trump Did It. The Trade War Started at Midnight. Stocks and Currencies are Falling, But So Are Interest Rates

Before the tariffs were imposed, we expected roughly 2% growth this year. Assuming the tariffs remain in place for a year, the Canadian economy will plunge into recession. We will likely see a few quarters of negative growth before growth gradually resumes.

Despite the inflation risk, the Bank of Canada will respond aggressively to minimize the meltdown in labour markets and the economy in general. When the Governing Council meets again on March 12, we expect another 25 bps cut in the overnight policy rate, bringing it down to 2.75%. Over the next year, we expect the Bank to continue to ease credit conditions, and a 2.0% overnight rate is likely.*

The Canadian 5-year bond yield, a bellwether for setting fixed mortgage rates, has fallen to 2.51%, its lowest level in nearly three years. Lower interest rates are favorable for housing markets, although the inevitable rise in unemployment and drop in spending will mitigate this effect.

~ Source: Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

*Remember, the Overnight Rate +2.2% = Prime Mortgage Lending Rate. Currently Prime is 5.2% and it is projected to decline to 4.2% by mid-year.

Bank of Canada Set to Act More Aggressively as Tariffs Take Hold

” RBC chief economist Frances Donald and assistant chief economist Cynthia Leach said the tariffs would likely spur the Bank of Canada into more rate cuts than it initially planned unless the US government decides to reverse its decision.

“Without tariffs, we expected the BoC to gradually cut rates to 2.25%,” they wrote on Tuesday. “Now, we expect that the longer tariffs remain in play, the greater the likelihood that rates fall faster and by a larger magnitude.”

They also highlighted further Trump measures against Canada scheduled to come into play in the weeks ahead: tariffs on steel and aluminum, set to arrive on March 12, and Trump’s threatened reciprocal measures on April 2.

BMO’s chief economist Doug Porter, meanwhile, said the bank now expects BoC decisionmakers to trim the benchmark rate to 2% by July in a series of quarter-point cuts in the next four announcements. ”

~ Source: CMP Canadian Mortgage Professional Newsletter

Now is not the time to panic about mortgage rates, I will continue to keep you updated and if it looks like those newly in a variable/adjustable rate mortgage are in danger, I will be reaching out to explore your options for locking in. I would also be doing that for my own mortgage.

Sending vibes for peace.

Sincerely,

Jenn