Uncertainty Reigns: What the Bank of Canada’s Pause Means for Your Mortgage
April 16, 2025
Rate Update: If Not Now, Then When?
July 30, 2025
June 4th, 2025
Canadians had their fingers crossed today for another rate cut, but unfortunately, their hopes were dashed when the Bank of Canada Governor Tiff Macklem left the prime rate unchanged.
Citing concerns that core inflation and GDP increased, Tiff felt that staying the course was the best option during this period of “Trumpcerntainty”.
And can you blame him?
The on again off again threat of tariffs has caused:
US companies to stockpile Canadian goods…
Canadian consumers to close up their wallets…
Whiplash to both the stock market and bond market…
…basically making the standard economic indicators as useful as a compass in the Arctic.
Worse yet, this economic confusion has the treasury departments of the big 6 banks scratching their collective heads, trying to figure out how to price your mortgage.
Until we can get past the “if” in Tariff, banks will continue to price a safety premium on mortgage rates.
But all is not doom and gloom! Hope that can be found in the last paragraph of today’s press release, where Tiff lays his cards on the table and hints that July might bring a rate cut.
So what do you do with your mortgage when stuck in these economic cross currents? Scroll on down to find out more.
TLDR:
Key points from the Press Release:
- Cutting the Carbon Tax reduced inflation by 0.6%
- Canadian economy is fragile, but showing resilience
- Unemployment is rising, but not at an alarming pace
- Home sales are slowing, though North Shore and Vancouver seem ok
How your mortgage is impacted:
- US bond market sales are slowing, keeping mortgage rates stuck on both sides of the border
- Uncertainty is making the banks skittish about aggressive pricing
- Bond yields are down this morning
- A potential July rate cut will ease the pressure on consumer debt
What we are recommending:
Based on the current market conditions, we feel that the 3 year fixed mortgage is still the sweet spot for mortgage holders. It gives you the ability to refinance at the 24 month mark if interest rates change, and has a lower penalty calculation if you need to break out of it completely. Having said that, determining which mortgage term you should pick involves a conversation around your life goals and risk tolerance.
Do you have a “Kick Me” sign on your back?
This may seem out of place during our rate update, but I thought it was worth bringing up – so bear with me.
In times of economic uncertainty, large companies become hyper-focused on the bottom line. And if sales are dropping, expenses need to be cut.
Where is the most effective place for a company to reduce overhead? Staffing, specifically middle and upper management.
If you are over 55, have been with your employer for over 15 years you likely have a “kick me” sign on your back, and are ripe to be packaged off.
And if that day ever comes, you can expect HR to sell it to you as an opportunity – a chance to rebrand and create excitement in your life!
They’ll say things like … you were on the cusp of retirement anyway? Right?!
Or … you’ve built a solid nest egg from all those well paid years of being with us? Right?!
And you’ll say umm no … I’ve been living on the North Shore where 60% of my income goes towards the mortgage, 40% to various taxes and 20% goes to university tuition/housing kids/ski passes/hockey and having multiple vehicles because who has 3 hours a day to use transit?!
BUT…thankfully I have close to 1.5 million in equity in my home – so I should be ok? Right?!
My turn! Umm no…
Unfortunately, once you retire, your borrowing potential will be based on your pensions. Usually, that means a 50% reduction, so the only way to access the golden equity in your home is to downsize. Keep in mind that the average cost in a downsizing transaction is about $100,000!
But what if you had a time machine? What if you could harness your peak earning years before you got kicked to the curb?
Well now you do!
That’s why we’ve launched a new strategy for our mortgage practice: Pre-Retirement Mortgage Planning.
During the planning session we’ll cover:
- Monthly Cash Flow During Retirement
- Survivorship of your mortgage ( not all banks offer this )
- The role of debt in retirement ( think – tax efficiency meets compound growth )
- How to avoid the Reverse Mortgage trap
If you feel that there’s a chance that you’re on HR’s radar for being packaged, a little planning now can change what would be a stressful experience into an exciting new chapter in your life. If you’re interested in finding out more, click on this link to schedule a time to call.
That’s a wrap for this post! This summer I’ll be focused on renovating, finding a quiet place to slow down and reconnect with those I love and supporting my husband as he once again takes on the Grouse Multi Grind Challenge. Last year he did 8, this year he’s shooting for 10!
Take care and have a wonderful summer!
The next Bank of Canada meeting is July 30th, 2025
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