U.S. Politics and Canada’s 2025 Interest Rate Forecast

General Danny Cardoso 21 Nov

The recent U.S. election brought about changes influencing Canadian mortgage rates. Here’s a detailed look at how these impacts might affect your mortgage choices in Toronto.

The Impact of U.S. Politics on Canadian Interest Rates

Political shifts in the U.S. often create ripples in Canada’s economy, impacting our dollar and mortgage rates. Recently, fixed rates in Canada have climbed, while variable rates are expected to decline as the Bank of Canada (BoC) is predicted to lower rates in December to support the economy.

Fixed Rates Are Increasing—Here’s Why

Fixed mortgage rates in Canada are influenced by bond market trends, which have responded to shifts in the U.S. economy. This has led to an increase in Canadian fixed mortgage rates, driven by investor demand for stability amidst U.S. policy changes.

“Fixed rates in Canada are closely tied to government bond yields, which are influenced by global market trends, especially U.S. economic conditions,” notes a recent Canadian Mortgage Trends article.

The Outlook for Variable Rates

On the other hand, variable rates are expected to trend downward. The BoC is scheduled to make its next interest rate announcement on December 11, 2024, where analysts predict a potential rate cut in response to economic differences between Canada and the U.S. This anticipated adjustment could make variable-rate mortgages a more attractive option for prospective buyers.

Stability Expected for 2025

After recent fluctuations, mortgage rates in Canada may stabilize in 2025, with the Prime rate projected to hold at 5.20% throughout the year. For clarity, here’s a schedule of the BoC’s 2025 announcements:

What Homeowners and Buyers in Toronto Should Expect

If you’re weighing fixed versus variable rates, it’s essential to consider these dynamics. Fixed rates may remain high due to external economic influences, while variable rates could offer a lower-cost option in the short term, pending the anticipated rate cut in December.

Staying Updated

For those considering a mortgage or renewal, the BoC’s December announcement is essential. According to an article from Financial Post, the BoC is expected to reduce rates by half a percentage point, which could provide relief for variable-rate mortgage holders in Toronto.

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To discuss mortgage options suited to your needs, reach out to us at 416-882-4172 or mortgages@dannycardoso.ca

US Election: Why did it impact Canadian mortgage rates?

General Danny Cardoso 18 Nov

The U.S. election season often impacts the Canadian economy, especially interest rates. Here’s what you need to know about recent developments and predictions for Canadian mortgage rates.

How U.S. Politics Influence Canadian Rates

Political shifts in the U.S. can lead to economic ripples in Canada, affecting our exchange rate, investment flows, and interest rates. Recently, fixed mortgage rates in Canada have seen a slight uptick, reflecting investor uncertainty. On the other hand, variable rates are expected to dip further, as the Bank of Canada (BoC) predicts lower rates in December to support the economy.

Why Are Fixed Rates Up?

Fixed mortgage rates in Canada are largely influenced by bond yields, which have risen due to U.S. economic signals. When markets feel uncertain about the U.S. political landscape, it can lead to higher bond yields and, consequently, higher fixed rates here in Canada.

What About Variable Rates?

The BoC’s stance on variable rates could be different. Variable rates often mirror the BoC’s overnight rate, which some analysts predict could see a cut in December. This potential cut is in response to economic gaps between Canada and the U.S., aiming to increase borrowing and spending in Canada.

What Should Homeowners and Buyers Expect?

If you’re considering a new mortgage or renewing an existing one, it’s essential to understand these dynamics. Fixed rates may remain elevated due to U.S. influences, but variable rates might offer a lower-cost option in the short term, with potential BoC cuts on the horizon.

Stay Informed

Staying updated on these developments is crucial. The BoC’s next interest rate announcement is scheduled for December 11, 2024. According to a recent article, “The Bank of Canada is expected to implement a significant half-point rate cut, reducing the policy rate to 3.75% following three previous reductions, in response to inflation falling below its 2% target and a sluggish economy.”

The Wall Street Journal

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If you’d like to explore the best mortgage option for you, reach out at 416-882-4172 or email mortgages@dannycardoso.ca 

Prime Rate and Your Mortgage: What’s the Deal with the Recent Drop?

General Danny Cardoso 4 Nov

The Canadian housing market is always changing, so it’s important to understand key financial terms – especially if you have a mortgage or want to buy a home. One of these key terms is the Prime Rate, which affects how much you pay on your mortgage each month. Let’s break down how the prime rate works and why it matters.

What is the Prime Rate?

The Prime Rate is the interest rate that banks in Canada charge their best customers (those with good credit). It’s like a benchmark that influences the interest rates on different loans, especially variable-rate mortgages and home equity lines of credit (HELOCs). The Prime Rate itself is heavily influenced by the Bank of Canada’s Overnight Rate, which is the interest rate at which banks lend and borrow money from each other overnight. When the overnight rate changes, the Prime Rate usually follows.

How Does the Prime Rate Affect My Mortgage?

With variable-rate mortgages, there are two types:

  • True Variable Rate: In this scenario, your payment remains ‘static’, even as the Prime Rate fluctuates. However, the portion allocated to interest versus principal changes. When rates decline, a larger portion of your payment goes toward the principal, accelerating your mortgage payoff. Conversely, rising rates mean more of your payment covers interest, extending the amortization period.

  • Adjustable Rate Mortgage: Often mistaken for a variable rate, an adjustable-rate mortgage actually “adjusts” with every Prime Rate change, causing payment fluctuations. This can be challenging for budgeting during rising rate periods but offers cash flow savings as rates decline.

  • Fixed-Rate Mortgage: Determined by bond yields, the Prime Rate does not affect fixed-rate mortgage payments. Therefore, if you have a fixed-rate mortgage, the buzz around Prime Rate drops doesn’t impact you. Even with a pre-approval for a fixed rate, you wouldn’t see much change or savings as fixed rates are currently lower than variable/adjustable rates..

Why Should I Care About the Prime Rate?

  • Impact on Monthly Payments: Changes in the Prime Rate directly impact your monthly payments if you have a variable-rate mortgage. A significant increase in the Prime Rate can lead to ‘payment shock,’ where your payments rise substantially. Fortunately, that’s not expected to happen for a few years, as the Prime Rate is projected to keep dropping until it plateaus in 2026.
  • Financial Planning: The Prime Rate is a good indicator of how the economy is doing. Understanding how it changes can help you plan your finances better, especially when it comes to renewing your mortgage or borrowing money.


What Should I Do Next?

Prime Rate recently dropped, which could affect your finances. It’s a good idea to talk to a mortgage professional about your options. I can help you figure out:

  • If your current mortgage is still the best choice for you
  • If refinancing to a different mortgage would be a good idea
  • How future changes in the Prime Rate might affect your monthly payments and financial goals

Don’t try to figure out the complicated mortgage world on your own. Talking to a mortgage professional can help you make smart choices and get the most out of your mortgage.