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The 2025 Political Transition & Its Impact on the Housing Market – Week 2: The U.S.-Canada Trade War: Consequences for Mortgage Rates and Home Prices

General Derek Cole 16 Mar

Canada is facing growing trade tensions with the United States. With recent U.S. tariffs on Canadian steel, aluminum, and oil, concerns are rising about how this will affect the Canadian economy, mortgage rates, and housing prices heading into 2025.

Here’s what homeowners, buyers, and investors need to know about how U.S. trade policies could shape the Canadian real estate market.

1. How U.S. Tariffs Are Impacting the Canadian Economy

The U.S. has recently announced:

  • 25% tariffs on Canadian steel and aluminum
  • 10% tariffs on Canadian oil and gas exports

🔹 Higher Costs for Materials: Construction projects, especially in housing, could face higher costs as materials become more expensive.
🔹 Reduced Export Revenue: Canadian industries could see lower profits, potentially leading to job losses and reduced economic activity.
🔹 Inflation Pressure: Higher costs for goods and energy could drive inflation up, putting pressure on interest rates.

📌 Why It Matters for Housing: Increased costs and inflation could make it more expensive to build and buy homes, while reducing household purchasing power.

2. Will Mortgage Rates Be Affected?

✅ Short-Term Impact:

  • The Bank of Canada (BoC) is cutting rates to stimulate the economy, but inflation from tariffs could slow down or limit future rate cuts.
  • Lenders may adjust rates cautiously, watching for how inflation trends develop.

✅ Long-Term Impact:

  • If tariffs lead to prolonged inflation, the BoC could pause or slow rate cuts to avoid destabilizing the economy.
  • On the flip side, if tariffs weaken the economy significantly, the BoC may be forced to cut rates more aggressively to support growth.

📌 What to Watch:

  • Inflation data in the next 3-6 months.
  • The BoC’s commentary on global risks and trade impacts.
  • Lender adjustments to mortgage rates based on market risk.

3. How Will Tariffs Affect Home Prices?

🔹 Higher Building Costs: If construction materials remain expensive, new housing developments may slow, limiting supply and keeping prices elevated.
🔹 Reduced Buyer Confidence: Economic uncertainty may cause some buyers to delay purchases, softening demand in the short term.
🔹 Rental Market Pressure: If home prices remain high and ownership slows, demand for rental properties could increase, driving rental prices up.

📌 Forecast:

  • Short-Term: Prices may hold steady or dip slightly if demand slows.
  • Long-Term: If supply tightens and rates drop, prices could rebound strongly in 2025.

4. What Should Buyers and Homeowners Do?

🔹 For Homebuyers:

  • Act sooner if you find a good deal, especially before construction costs drive prices higher.
  • Be flexible with housing types and locations to stay within budget.

🔹 For Current Homeowners:

  • If you’re considering refinancing, act while rates are still falling, but stay alert for any sudden changes.
  • If you plan to sell, monitor market activity closely—demand could pick up if rate cuts accelerate.

🔹 For Investors:

  • Rental properties could see increased demand if homeownership slows.
  • Focus on regions with stable job markets to minimize vacancy risk.

Conclusion

📉 Tariffs are introducing new risks to Canada’s economic and housing outlook.
🏡 Mortgage rates may fluctuate, depending on how inflation and economic growth evolve.
📊 Home prices will be influenced by supply, construction costs, and consumer confidence.

📌 Next week: We’ll explore strategies for homebuyers and homeowners to navigate political and economic uncertainty.