As most have already heard, the BoC has cut its benchmark interest rate by a quarter-percentage point today.
So as we stand, the policy rate is 3% which is welcomed by many home owners with variable rate mortgages and those with line of credit. This was the 6th consecutive rate cut and deemd to be the end of “quantitative tightening.” Having said that BoC also warned that the stability and resilience of the Canadian economy will be tested if tariffs are implemented and trade wars break out between Canada and the United States of America as this could rapidly shift the economic landscape—and with it, the real estate market.
Here’s why tariffs have the potential to negatively effect our real estate sector.
Retaliation and Inflation
Tariffs don’t operate in isolation. If the U.S. imposes significant tariffs on Canadian goods, Canada is likely to retaliate with its own tariffs which could lead to more costly goods and thus increased inflation.
Economic Strain on Households
Increased inflation reduces purchasing power. Everyday goods become more expensive, leaving less disposable income for housing investments. For real estate, this means fewer buyers and tighter budgets, further challenging market stability.
Uncertainty in Rate Movements
The Bank of Canada’s response to these challenges is far from predictable. If inflation spikes dramatically, the BoC may reverse course, hiking rates to counteract rising prices. However, if the economic impact of tariffs proves catastrophic—such as widespread layoffs in industries like automotive—the BoC could instead cut rates to stimulate the economy and stave off disaster.
At this point, we don’t know what the future holds. For the time being it is important to stay up to date and work with a highly knowledgable realtor who can provide solid guidance and help you stay informed.
Here are some key strategic moves to consider:
1. Educate yourself on the Temporary Nature of Rate Cuts
Make sure you understand that current rates are unlikely to remain low if tariffs lead to inflationary pressures. For buyers, this might mean acting quickly to secure financing before rates rise. For sellers, timing will be critical to capitalize on potential short-term demand.
2. Anticipate Inflation’s Impact
Monitor goods and services that influence construction, renovation, and property maintenance costs. Inflation in these areas could affect property values, particularly in suburban or rural areas where buyers are more price-sensitive.
3. Focus on Stable Markets
Listings in sectors or regions that are less vulnerable to economic shocks will thrive. For example, properties in diversified job markets or areas with strong foreign investment may remain more resilient.
4. Adapt Mortgage Advice
With the possibility of fluctuating rates, variable-rate mortgages might still be a smart option for risk-tolerant clients. However, ensure you are fully informed about the potential for rates to increase later in the year.
5. Track Foreign Investment Trends
A weaker Canadian dollar, caused by economic turmoil, could attract foreign buyers to major urban centers like Toronto and Vancouver. Stay attuned to exchange rate fluctuations and adjust your strategies to cater to this demand.
There you have a few strategies and thoughts to consider as you navigate your real estate journey during these unstable times.
I will close out by saying, if you are considering buying or selling within the next 6 months, take action now. Connect with a knowledgable Realtor and mortgage agent who can guide you and help you prepare. This is an opportune time for Buyers and Sellers. Do not wait, lock in your rate now. Find Your best Rate
Whether you are interested in buying or selling real estate, know I am here to help guide you every step of the way.
If you have any questions about real estate from home evaluations to mortgages to searching for properties in your area, don't hesitate to contact me today!
