Tariffs Are Here! What This Means for Canadian Interest Rates

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By now we’ve all heard of the tariffs, how they work, and who they effect. They hit us all. Both Canadians and Americans. I’m not here to dive in to the politics of the situation or how they’ll affect the economy, etc etc. I’m a realtor so I’m going to show you how they may affect interest rates.

Please note, this is not a positive, real estate spin on a shitty situation. This is a prediction after reading several articles, many from mortgage brokers, compiling the information into this story, then running it by a few smarter people and one of my rock-star mortgage brokers.

The 25% tariffs are on and Canada is retaliating with the same. Experts predict some big economic consequences: GDP down by 2.5%, unemployment up to 8%, and inflation could spike to 7.2%.

Think of Tariffs like a tax on imported goods. If U.S. companies are buying Canadian products, they’ll have to pay 25% more. And they’re not just going to absorb that cost—they’ll pass it on to American consumers. That means higher prices on everything -  lumber - cars - food - whatever. Same goes for the Canadian side as we impose the dollar-for-dollar tariffs on the U-S.

This leads to something called cost-push inflation—where prices rise not because people are spending more, but because it costs more to make and ship products. It’s different from demand-driven inflation, which happens when people are spending like crazy.

Here’s where it gets interesting for mortgage rates. Normally, when inflation jumps, the Bank of Canada raises rates to cool things down. We just saw that in 2022. But if tariffs slow the economy and job losses pile up, the Bank will most likely cut rates to help keep things moving.

If that happens, variable mortgage rates could drop. If you have a variable-rate mortgage, that could mean lower monthly payments—extra money in your pocket as everything gets more expensive.

And fixed rates - Those are tied to bond yields, which tend to fall when the economy looks shaky. Investors rush to buy government bonds, which pushes yields down—and that can lead to lower fixed mortgage rates too.

So, while tariffs could push up prices on everyday goods, they might actually bring lower mortgage rates in Canada. If you’re thinking about buying or refinancing, now’s the time to pay attention. Now is the time to partner with a mortgage broker who know what the hell they’re doing.