Mortgages and Market Insights

Lately, markets have been navigating a new layer of uncertainty this time driven less by domestic data and more by global trade dynamics. While the headlines can feel noisy, the real story is how these developments may quietly shape interest rates, lending decisions, and planning opportunities here at home.

Global tension, local consequences

Recent discussions between Canada and the United States particularly around the upcoming CUSMA (The Canada-United States-Mexico Agreement) review have put trade policy back in the spotlight. Prime Minister Carney’s recent remarks at the Davos summit signaled Canada’s intent to negotiate from a position of strength, highlighting our role in energy supply, critical minerals, and Arctic access.

Why does this matter for borrowers?

Because the outcome of CUSMA negotiations will influence inflation, economic growth, and ultimately the direction of interest rates.

• If negotiations remain constructive, we are likely to see more of what we have been living with: sticky inflation, lingering uncertainty, and a slow-but-steady economy.

• If talks break down, and trade barriers rise, Canada could slip toward recession, an environment that would likely push rates lower.

For now, markets are pricing in uncertainty rather than crisis.

Rate outlook: what we are seeing now

Variable/ adjustable rates:

At the most recent Bank of Canada announcement, there was no change, and markets are largely expecting rates to remain steady through much of 2026 unless we see meaningfully weaker data.

Current outlook:

• Short term (0–3 months): Flat, with very little expectation of cuts

• Medium term (3–12 months): Flattening, with some risk of increases late 2026

• Long term (1–5 years): Gradual upward pressure tied to long-term inflation trends

One interesting divide worth noting:

International traders tend to expect rates to rise over the coming years, while many Canadian economists believe that if rates move at all, they may still drift lower. For now, consensus sits firmly in the “wait and see” camp.

Fixed rates:

After a volatile December, bond markets have settled somewhat, with the 5-year Government of Canada yield hovering around (or just under) 3%.

What this means for fixed rates:

• Short term (0-3 months): Rates rose late last year but have stabilized

• Medium term (3 – 12 months): Small bumps higher are more likely than sharp drops

• Long term (12 – 60 months): A slow climb, roughly 0.20% per year which is driven by inflation.

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With the 5-year bond once again testing the 3% level, lenders have already nudged fixed mortgage rates higher. If markets continue to expect rising rates, fixed terms, particularly 5-year options may regain popularity for borrowers seeking predictability.

The bigger economic picture

The Bank of Canada has been clear: trade uncertainty is now one of the largest risks facing the Canadian economy.

U.S. tariffs have already weighed on exports, and while Canada is actively pursuing trade diversification, no single market can fully replace the scale and efficiency of U.S. trade, especially for steel, aluminum, and manufacturing. Even so, infrastructure spending and targeted government investment are expected to provide some economic support over time.

The takeaway? This is a period of transition, not collapse but transitions require thoughtful planning.

What this means for you?

With so many moving parts rates, trade policy, inflation it can feel difficult to know when (or how) to act. That’s exactly why strategy matters more than predictions.

If you have:

• A mortgage renewal coming up

• Plans to buy or refinance in 2026

• A variable/ adjustable rate you are unsure about

• Or simply want clarity amid the noise

  
  

Now is a smart time to check in.

Mortgages don’t have to feel complicated or reactive. With the right guidance, they can be calm, deliberate, and aligned with where you are headed.