We’ve been hearing a lot about tariffs lately and how they’ll affect us as they continue to unroll. You’re probably paying extra attention to the situation, especially if you’re looking to invest in a home and wondering how the roller-coaster market will affect your purchasing power.
While the situation continues to evolve as political leaders hatch their plans and retaliations, here’s what we know about how tariffs could impact the cost of buying a home in Canada in the near future.
How Are Tariffs Impacting the Home Price?
If you want to purchase a new build, be aware that the increased cost of imported materials like steel, lumber and aluminum will affect the price. As developers and builders deal with the increased costs, they are expected to pass those costs on to the buyer.
Because new builds will be more expensive in the foreseeable future, many purchasers may consider investing in an existing home. As that happens, the number of available properties could dip, increasing the resale price of existing houses as well.
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How Will Tariffs Delay New Homes?
The other consideration when purchasing a new build right now is that it could take a very long time for builders to complete the project. As the costs of imported materials swell, it may take longer for builders to get their hands on what they need. Meanwhile, appliances like washing machines and certain stoves are also largely coming from the U.S.. Therefore, the price and demand for those items will also affect overall pricing and completion time.
Will Tariffs Affect Mortgage Rates in Canada?
This is a truly complicated question, but the short answer is yes. Mortgage rates in Canada are certainly affected by tariffs. As Canada braces for inflation and higher consumer prices, the Bank of Canada’s response has been to lower its key interest rate. When the Bank lowers its rate, that typically means fixed mortgage rates will (eventually) decrease too. That’s because bond yields, the expected return an investor will get from a bond, also go down.
As the economy continues to slow, the Bank of Canada will react in real time. That could mean some of the lowest fixed mortgage rates we’ve seen in years. However, there is so much uncertainty in the market and in politics that aren’t predictable. A lower fixed rate can be great for homebuyers so long as they still have a steady income to rely on.
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How Are Tariffs Affecting Variable Interest Rates?
The recent Bank of Canada decisions are good news if you have a variable-rate mortgage or a line of credit. That’s because your rate ties directly to the Bank’s rate. However, how long rates will trend this way is unknown, which is why there’s always some risk with a variable-rate mortgage.
If you plan on refinancing or purchasing a home with a short-term mortgage and are okay with using a variable rate, it could be a smart option to pursue right now. It is always best to speak with a mortgage professional before making that call.
How Else Can Tariffs Affect the Housing Market?
Because of all the uncertainty, homebuyers aren’t exactly rushing into buying a home like they tend to do every spring. Some are waiting to see if mortgage rates continue to fall, while others want to ensure their jobs are secure before taking the plunge. And then there are those who are trying to sell their properties in a stalled market before moving on to their next homes.
The result of these actions is that home sales are lower overall than they should be this time of year. If you’re a first-time buyer looking to purchase a condo, the good news is that there’s a low demand for condos right now. Therefore, condos are competitively priced.
If you’re looking to move up the real estate ladder and sell your condo for a home, though, condo owners are struggling to sell their properties right now. That could create a frustrating scenario if you’re hoping to upgrade soon.
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