Are Mortgage Rates Going to Drop in 2025? How U.S. Tariffs Could Impact You
Christine MacPherson • February 10, 2025
Is the Economy Going to Crash? What Canadian Homebuyers Need to Know
With new U.S. tariffs on Canadian goods already in place—and Canada retaliating with its own tariffs—many Canadians are asking:
- "Are mortgage rates going to go down in 2025?"
- "Is the economy going to crash?"
- "How will these tariffs impact home prices and affordability?"
These are valid concerns, especially for homebuyers, homeowners renewing their mortgages, and those considering refinancing. While we can’t predict the future with certainty, the Bank of Canada (BoC) is widely expected to cut interest rates in 2025 to help offset economic uncertainty. However, rising inflation and shifting trade policies could complicate how quickly and how much rates actually drop.
Here’s what you need to know about how these tariffs could affect Canada’s economy, mortgage rates, and home affordability in the coming months.
Will Mortgage Rates Go Down in 2025?
The Bank of Canada has been signaling rate cuts for months, but how low they go—and how quickly—depends on several factors:
- Tariffs are slowing economic growth – The new U.S. tariffs on Canadian goods, and Canada's retaliatory tariffs on U.S. imports, are putting pressure on businesses and increasing costs for consumers. If economic growth slows significantly, the BoC may lower rates to keep borrowing and spending active.
- Inflation is still a concern – Higher tariffs often lead to higher prices for goods, which could drive up inflation. The BoC has to balance rate cuts with the risk of rising inflation, which could slow the pace of cuts.
- Global uncertainty adds risk – The U.S. election, ongoing geopolitical tensions, and financial market fluctuations all add unpredictability. If the economy worsens, rate cuts may come sooner and deeper than expected.
What Does This Mean for You?
Rates are expected to decrease, but we’re in uncertain times. If you're thinking about buying a home, refinancing, or renewing your mortgage, the best approach is to lock in now with flexibility to adjust later.
Should You Lock in a Mortgage Rate Now or Wait?
Many homebuyers and homeowners are wondering whether they should lock in a mortgage rate now or wait for rates to drop further in 2025. The good news? Most lenders allow you to lower your rate if rates drop before closing.
Here’s why locking in now is a smart move:
- Locking in protects you from unexpected rate hikes – While rates are projected to drop, inflation or unexpected economic shocks could slow cuts or even cause rates to rise. Locking in now ensures you’re covered.
- Many lenders allow a rate drop before closing – If rates go lower before your mortgage is finalized, most lenders will adjust your rate accordingly. This gives you peace of mind knowing you're getting the best possible deal.
- Economic uncertainty makes waiting risky – Tariffs, inflation, and global trade tensions all create uncertainty. Locking in now ensures you don’t miss out on today's competitive rates while still giving you room to adjust.
Fixed vs. Variable: Which Mortgage Should You Choose?
If you're debating between a fixed or variable mortgage, here’s what to consider:
Mortgage Type
Best For
Considerations
Fixed-Rate Mortgage
Homeowners who want predictability
Offers stability, but you might miss out on savings if rates drop significantly.
Variable-Rate Mortgage
Borrowers who are comfortable with fluctuating payments
Can save you money if rates decrease, but payments could rise if inflation pressures slow rate cuts.
If you’re unsure which option is best for you, let’s discuss your financial goals and find the right strategy.
Is the Economy Going to Crash? What This Means for Canadian Homebuyers
While Canada’s economy is facing major uncertainty, most experts do not expect a full-blown crash. Instead, we’re likely to see:
- Slower economic growth due to rising costs from tariffs and inflationary pressures.
- Lower interest rates as the BoC tries to stimulate economic activity.
- A cooling housing market in some regions, as affordability challenges affect demand.
The best thing you can do right now is stay informed and make proactive mortgage decisions that protect your financial future.
Let’s Talk About Your Mortgage Options
Navigating the mortgage market in uncertain times can be confusing, but you don’t have to do it alone. Whether you’re looking to buy a home, renew your mortgage, or refinance for a better rate, I can help.
📞 Call me at
403-968-2784 or email
christine@flaremortgagegroup.com,and let’s create a mortgage strategy that fits your needs.
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When most people think about mortgage rates in Canada, they think about inflation here at home, jobs here at home, and Bank of Canada announcements. Those things absolutely matter. But global events matter too, and right now they matter a lot. On March 18, 2026, the Bank of Canada held its policy rate at 2.25 percent and made it clear that the war in the Middle East has increased volatility in energy prices and financial markets, while raising risks for the global economy. Global News also reported that policymakers are watching the conflict closely because higher oil, transportation and fertilizer costs could spill into inflation and affordability pressures for Canadians. This matters if you are buying, refinancing, renewing, or simply trying to decide whether to lock in a rate. In my view, the real story is not just that Canada held rates steady. The bigger story is that global pressure can quickly change where mortgage rates go next, even when nothing dramatic has changed in your own neighbourhood. Why a war far from Canada can affect your mortgage Canada does not set mortgage rates in a bubble. The Bank of Canada said the conflict has driven sharp increases in global oil and natural gas prices, and that it could also disrupt the movement of other commodities, including fertilizer, through transportation bottlenecks linked to the Strait of Hormuz. Governor Tiff Macklem added that while Canada is not hit directly in the same way as some regions, reduced global supply still means higher global prices. That is the kind of pressure that can make inflation harder to control. When inflation risks rise, central banks get cautious. That does not always mean an immediate rate hike, but it can mean fewer cuts, longer holds, or tougher language. That is exactly why this latest Bank of Canada announcement matters. The Bank held, but it also signaled that the outlook is more uncertain and that it is prepared to respond as conditions evolve. What this means for variable mortgage rates If you have a variable rate mortgage, the Bank of Canada is still the main thing to watch. Variable rates in Canada are closely tied to lender prime rates, and prime typically moves when the Bank changes its overnight rate. As of March 27, 2026, Canada’s prime rate is 4.45 percent, and Ratehub notes that variable mortgage rates have remained stable following last week’s rate hold. So, for now, borrowers with variable rates have not seen a fresh jump just because of the war. But the risk has changed. If global conflict keeps energy prices elevated and inflation proves harder to cool, future cuts may be delayed. In plain English, this means some borrowers who were hoping for lower payments later this year may need to prepare for a longer period of higher borrowing costs than expected. That is not a certainty, but it is a reasonable takeaway from the Bank’s current tone. Variable rate borrowers should focus on payment room If you are in a variable rate mortgage right now, this is a good time to review your budget honestly. Ask yourself whether your payment still feels comfortable if rates stay where they are for longer. A lot of borrowers were planning around future relief. The new global backdrop is a reminder that relief can get delayed very quickly. What this means for fixed mortgage rates Fixed rates are a little different. They are not priced directly off the Bank of Canada’s overnight rate. TD explains that fixed mortgage rates are based on the bond market, with Government of Canada bond yields used as a benchmark. Ratehub now says the ongoing conflict in the Middle East and the shrinking likelihood of central bank cuts are pushing bond yields higher, and that fixed mortgage rates increased significantly this week. That distinction is important. Even if the Bank of Canada does nothing at its next meeting, fixed rates can still move. If investors keep pricing in higher inflation risk, lenders can raise fixed mortgage pricing before the Bank ever changes its policy rate. For buyers and renewing homeowners in Edmonton, that means waiting can carry a real cost. What buyers and homeowners in Edmonton should do now I think this is a planning market, not a panic market. The latest data does not say every borrower should rush into the same product. It does say that global events are now part of the mortgage conversation again, and ignoring them is a mistake. If you are buying, get pre approved and secure a rate hold while you shop. Ratehub notes that current pricing can often be held for up to 120 days, which can be valuable in a market where fixed rates are moving. If you are renewing, compare your options early instead of waiting for the lender’s first offer. If you are refinancing, think beyond rate alone and look at cash flow, penalty costs, and how much payment certainty matters to you right now. The bottom line The Bank of Canada did not raise rates in March. But the global pressure behind mortgage rates is clearly building. War driven energy shocks can feed inflation. Inflation pressure can keep central banks cautious. Cautious central banks and rising bond yields can keep mortgage costs higher for longer. That is the chain Canadians need to understand right now. If you want to talk through your options in Edmonton, I am happy to help you compare fixed and variable strategies based on your timeline, budget, and risk comfort. Call 403-968-2784 or email christine@flaremortgagegroup.com to start the conversation.
The biggest question I am getting right now from buyers in Edmonton and area is simple. Should I lock in my rate or go variable in 2026? With rate changes over the past two years and renewed speculation about what the Bank of Canada will do next, choosing between fixed and variable is no longer a simple decision. The right strategy depends on your goals, risk tolerance, and timeline. Let me break it down clearly so you can decide what makes sense for you. Where Mortgage Rates Stand in 2026 After a volatile cycle of increases followed by gradual easing, 2026 has introduced more stability into the mortgage market. Fixed rates have adjusted downward from peak levels, while variable rates have started to look competitive again as expectations grow around future Bank of Canada rate cuts. Here is the key difference: Fixed rate mortgage: Your interest rate stays the same for your full term. Your payments stay predictable. Variable rate mortgage: Your rate moves with the prime rate. Payments or interest portion may change depending on your lender structure. Buyers in Edmonton are asking whether stability is worth paying slightly more today, or if flexibility and potential savings are worth some short term uncertainty. When Locking In Makes Sense in 2026 There are situations where a fixed rate mortgage is the smarter move. You Want Payment Stability If you are buying your first home or stretching your budget, stability matters. A fixed rate protects you from surprises and allows you to plan with confidence. You Believe Rates Could Rise Again While forecasts suggest moderate easing, inflation and global economic uncertainty still exist. If rates rise unexpectedly, fixed rate borrowers are protected. You Prefer Peace of Mind Some buyers simply sleep better knowing their payment will not change. There is real value in that. For families purchasing in Edmonton, especially those managing childcare costs or other major expenses, predictability often outweighs potential savings. When Variable Could Be the Better Strategy Variable rates are making a comeback in 2026. Here is why they are worth considering. You Expect Further Rate Cuts If the Bank of Canada continues to reduce rates later this year, variable mortgage holders benefit immediately. You Plan to Sell or Refinance Variable mortgages often have lower penalties if you break your term early. If you plan to move, refinance, or restructure in a few years, this flexibility can save thousands. You Have Financial Cushion If your budget allows room for payment fluctuations, variable can be a strategic way to reduce long term interest costs. Historically, variable rates have often outperformed fixed over the full term. The key is whether you are comfortable riding out short term volatility. Comparing Fixed and Variable in 2026 Here is a simplified comparison to help buyers in Edmonton understand the trade offs. Fixed Rate Payment Stability: High Rate Movement: None during term Penalty to Break: Higher Best For: Risk averse buyers Potential Savings: Stable but limited Variable Rate Payment Stability: Moderate Rate Movement: Moves with prime Penalty to Break: Often lower Best For: Flexible buyers Potential Savings: Greater if rates fall A Smart Strategy for Today's Buyers There is no universal answer. The best mortgage strategy in 2026 depends on three things. Your financial comfort level Your timeline in the property Your long term plans Some buyers are even choosing shorter fixed terms, such as three years, to balance stability and flexibility. Others are exploring adjustable variable options with capped payments. As your mortgage professional in Edmonton, my role is to walk you through real numbers, not headlines. We run payment scenarios under different rate environments so you can see exactly what risk and reward look like. What First Time Buyers Should Consider If you are entering the market for the first time, qualifying is already stressful. In many cases, locking in can simplify your transition into homeownership. If you are upgrading and have equity, you may have more room to take a calculated risk with variable. Every Buyer's Situation is Unique Rates are no longer at emergency lows, but they are also not at peak highs. That creates opportunity. The question is not whether fixed or variable is better in general. The question is which one fits your life right now. If you are buying in Alberta, let's build a strategy that protects your budget and positions you for long term success. Call 403-968-2784 or email christine@flaremortgagegroup.com to review your options. I would be happy to walk you through the numbers and help you make a confident decision.
