Trump presidency has Canadian real estate watchdogs anxious

Real estate experts have noted that the results of the U.S. presidential election will likely have lasting impacts on Canadian mortgage rates. 

Researchers at Wahi — a Canadian real estate organization — have noted that Donald Trump’s second term in the Oval Office will likely dampen borrowing costs within the Canadian economy. 

Specifically, if Trump follows through on his ‘America First’ policy a 10 percent tariff on imports to the U.S. would become a likely reality. 

If imposed, these tariffs would affect the Canadian economy by reducing exports and impeding growth.

If this occurs, it is theorized that the Bank of Canada could slash the overnight rate (the key interest standard in Canada) to balance the domestic economy.

In Canada, variable mortgage rates (loans with no fixed interest) are directly impacted by the overnight rate.

These would then would likely plummet as a byproduct of imposed tariffs.

Fixed rates (loans with a fixed interest standard) could also be severely impacted, as lower bond yields due to U.S. policies could show where the fixed rate standards are heading for homeowners — in various ways. 

Wahi analysts have indicated that it is too early to tell where the winds will shift, however, despite the infancy of the President Elect’s economic impact, researchers are still highly confident that variable and fixed rates will diverge, as they have done so in the past. 

Analysts at Wahi have noted that if the Bank of Canada cuts the overnight rate while bond yields remain heightened, variable rates could lower while fixed rates would not — creating a disparity among Canadian homeowners. 

Wahi’s report noted that this has happened in the past, in 2003, 2008, 2009, and 2015,

Combining the economic uncertainty presented by the Trump precedency and the data from Wahi, researchers recommend that new Canadian homeowners look into hybrid mortgages (a combination of both variable and fixed), as they will likely create a more stable foundation if economic shifts in the U.S. impact Candian mortgage rates. 

For more information on how upcoming U.S. policies may impact Canadian homeowners, check out Wahi’s full report on their official website.