Rate Cuts, Trade Wars & Mortgage Moves
March 12, 2025
April 16th, 2025
Uncertainty.
That word was used nine times in today’s Bank of Canada announcement. And with that word ringing in Governor Tiff Macklem’s mind, he decided the prime rate should remain unchanged.
Today’s press release read like a grade 6 science lesson on Newton’s Third Law of opposing forces. Half of the release discussed the potential inflationary impact of the trade war, and the other half discussed how cooling consumer and business confidence was limiting the impact of inflation.
As the saying goes, if you lined the world’s economists head to toe, they still wouldn’t reach a conclusion!
So let’s unpack some key points of today’s press release and then jump into what it means for your mortgage.
The Good News:
- Inflation is on track to meet the BOC targets
- Oil, Mortgage Costs, Rents are slowing which is good for inflation
- USA Inflation is slowing which is good news for our mortgage rates
- Our mortgage inquiry rate picked up by 35% last month – good news for real estate.
- Wage growth is slowing – a really good thing for inflation.
The Not So Good News:
- Business and Consumer confidence is slipping.
- Trade war seems more about the ego of our leaders than the economy
- Tariff related inflation could keep fixed mortgage rates stuck at current levels.
What it means for your mortgage:
If there is one thing the capital markets hate is uncertainty. Unfortunately, that’s Trump’s weapon of choice. And if you are a banker running the treasury desk of a big 6 bank, you probably have a picture of Trump on your dart board.
Where I’m going with this is until we see a clear path on the trade issues from the White House, the banks are going to be keeping their purse strings tightly closed. This means we’ll see rates stuck in their current range for the next 2 – 3 months.
Speaking of closed tightly, the banks are starting to decrease their posted rates, but not their discounted rates. Why would they do that? Because it increases your penalty to break out of your mortgage! Oh those bankers, they make Ebenezer Scrooge look like a philanthropist!
This brings me to another point. As I mentioned in my last update, if you have a mortgage rate above 6%, now is the time to look at your options. Last month, we helped 5 people save, on average, $10,000 by switching to a lower rate. And that figure is after they paid the penalty!
With the bank’s manipulation of their posted rates, this opportunity is starting to dwindle, so click here if you are curious to see how much money you could save.
What to do when there is no clear direction in mortgage rates:
With the prospects of fixed mortgage rates above 3% for an extended period, our approach to financing is evolving. We are now starting to expand our approach to take on more of a financial planning perspective. Some of the tactics we are implementing are the following:
Cash Damming:
This financing strategy involves harnessing the rental income from your investment property and using it to pay down your principal mortgage faster. The goal is to transform your non tax deductible debt into tax efficient debt.
The Cascade Method:
Deciding what to do with your mortgage in this current economic environment feels more like a spin at the roulette table than making an informed financial decision. With the Cascade Method, you can reduce that stressful feeling by structuring your mortgage in a way that keeps your options open if things change. So instead of putting all your chips on black, you now have them spread out over multiple numbers!
Debt Swap:
Do you have non-registered investments AND a mortgage balance? If you do, you aren’t just leaving it behind you’re putting it in the government’s pocket! With the Debt Swap strategy, you can transform the non-registered portion of your investment portfolio into a tool that can increase your net returns by lowering your taxable income.
If you’re interested in learning more about one or all of these strategies, click here, and either I or one of my team members will contact you.
The Bottom Line:
The next two months will be filled with uncertainty.
And to be completely open with you, uncertainty is something I have a tough time with. Without going into detail it has a lot to do with the environment I grew up in.
How do I deal with it when the noise is just SO loud? Here are my top 5 go to moves. ( I call them moves because I feel the best way to get out of my head is to physically change my state)
- Go for a walk: There’s a 4k loop I do on Fromme. I can peel it out in under hour and when I emerge from the forrest I’m refreshed, refocused and have a full heart.
- Listen to a book: I have over 350 books in my audio library. Listening to a book is like being in a seminar. I prefer listening to books over reading because the narrator’s voice pushes out that voice in my head. And because I can listen to a book while engaging in simple activities, I’m able to listen to a book every two weeks.
- Daily Gratitude Practice: Our minds are wired to see and anticipate problems. It’s why we’ve survived as a species, but at a cost – we often glaze over the good stuff that happens in the day. In the evening, I sit down with my journal and replay the day taking inventory of all the good/fun/beautiful things I experienced. My secret trick is I don’t just write down what I experienced, but how it made me feel. Try it! You’ll be surprised at how much good we just let slip right by us – completely unnoticed!
- Hug someone: A good friend, a partner, your spouse, your kids. A good hug, and I’m talking a solid tight squeeze of someone you love fills my soul. Taking a moment to let someone know they are truly loved and important sends ripples out into the universe.
- Be playful with the universe: I know this sounds woo woo, but playing with the universe goes hand in hand with gratitude. You will be surprised by what you can manifest if you set an intention. My husband is especially talented with this. He’ll drive into any parking lot, wave his hand and say I need a parking spot – and magically, one will appear. He’s dubbed himself the Par-King…I know it’s over the top dorky, but I love him anyway!
I hope my little recipe helps you find that ray of sunshine in your day!
The next Bank of Canada meeting is June 4th, 2025
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