2025-04-22 | 07:25:34

The Bank of Canada took a break from cutting the interest rates last week, and the word of the day was ‘uncertain’. Their press release used that word no fewer than ten times. The Bank of Canada has a sole mandate of keeping inflation steady at a target of about 2%. Tariffs are by nature inflationary, but they also hurt our employment numbers, therefore the Bank is going to take a wait-and-see approach. The Bank of Canada’s US counterpart, the Federal Reserve, has a dual mandate: keeping inflation steady as well as trying to achieve full employment, so we could see the US prime rate react differently than here in Canada.

The incoming tariffs imposed by the Unites States are causing the financial markets to behave erratically. I am sure you have all been watching your investment portfolios take a hit over the last couple of months. In the past, a declining stock market has almost always brought lower fixed interest rates. Investors leave the stock market, and that money would usually flow into the bond market causing bond prices to go up. When bond prices go up, the bond yields go down, and fixed interest rates are set by the bond yield.

This time, that money is going elsewhere, as US Government Bonds are not being seen as the safe harbour in the storm that they used to be. (For a clue on where that money is going now: check out the price of gold over the last 3 months). So we have actually seen the fixed rates climb a little. Here in Canada, our bond yields get dragged along with the US market so it’s not just a US problem.

So how does that affect your mortgage? I will take the Bank of Canada’s approach: it’s uncertain. For those of you on a variable rate mortgage, I would probably recommend that you continue to ride it out, as the next Bank of Canada move will probably be to lower the rate again. If we move from economic slowdown to full-blown recession, the prime rate will need to come down even further. For those of you that took the safety of a fixed rate back when they were over 5%, it’s probably worth a phone call to determine if there is money to be saved.

One thing that is certain: if you are carrying higher interest debt outside of your mortgage in the form of credit cards, lines of credit, or loans, this is probably the time to take steps to reorganize your finances and lower your interest costs and monthly payments. If we do get a full-blown storm, you will be in better shape to withstand it. If it ends up just being a spring shower, you can use it as a springboard to pay off your mortgage faster and start saving for the next round of bad weather.

Call me and we can set up a time to review your situation, I am always happy to provide an in-depth analysis of your mortgage.

Let me know if you have any questions, anytime.

Patrick

(905) 299-4665