In the wake of Donald Trump's election victory on November 5, 2024, Canadian mortgage rates have begun to rise, with lenders increasing their rates by 5 to 10 basis points due to global market reactions [b914e8d1]. BMO's chief economist, Douglas Porter, emphasized the importance of a robust U.S. economy for Canada, suggesting that Trump's presidency could significantly impact both countries [b914e8d1].
Following the election, the 10-year U.S. Treasury yield climbed to 4.43%, the highest level since July, while Canada's 5-year bond yield reached 3.11% [b914e8d1]. In recent weeks, Canadian bond yields surged over 61 basis points, with a notable 17 basis point increase in just the past week [d594e13f]. Mortgage expert Ryan Sims predicted that Trump's presidency would 'supercharge' the U.S. economy, although he cautioned about potential increases in U.S. debt. This economic shift is expected to influence central bank decisions, with the Federal Reserve likely to cut rates to between 4.50% and 4.75%, and the Bank of Canada potentially reducing rates by 50 basis points on December 11 [b914e8d1].
However, a recent analysis by Desjardins Group warns that the Republican sweep in the U.S. could pose a recession risk for Canada. The anticipated policies, including tax cuts, deregulation, tariff hikes, and reduced immigration, may have significant negative impacts on the Canadian economy [018acf35]. Desjardins revised its economic outlook for Canada lower, citing concerns over mortgage renewals and immigration curbs, which could exacerbate inflation risks and labor disputes [018acf35].
At a panel discussion held at the University of Ottawa on November 6, 2024, political experts analyzed the implications of Trump's victory. Professor Jacqueline Best projected economic instability for Canada due to Trump's tax cuts and tariffs, predicting inflation and a potential global trade war [9fde24c8]. André LeCours highlighted the influence of populism on Canadian politics, while Kevin McMillan questioned the feasibility of Trump's deportation plans, estimating costs of $300-400 billion [9fde24c8]. The event attracted around 60 students, reflecting a sense of trauma among attendees.
In the United States, mortgage rates are projected to rise from 6.1% to 6.8% following Trump's election, creating further uncertainty in the housing market [46b29263]. Daryl Fairweather from Redfin noted that the market is already pricing in Trump's proposed tariffs, which are expected to lead to prolonged high borrowing costs [46b29263]. Thomas Ryan from Capital Economics predicts that mortgage rates will remain around 7% throughout 2024, with Mark Zandi from Moody's Analytics suggesting that rates won't decrease until late 2025 [46b29263].
In Canada, major banks such as BMO, Scotiabank, and TD Bank are expected to benefit from Trump's economic policies. However, there are concerns regarding tariffs and protectionist measures that could pose risks to the Canadian economy. Porter noted that Canada could be significantly affected by any trade tensions arising from the U.S. administration's policies. Sims also expressed worries about Canada's heavy reliance on property prices for economic growth, indicating that any downturn could have serious implications for the housing market and the broader economy [b914e8d1].
Experts predict that fixed mortgage rates will soon rise as a result of these bond yield increases, with Ron Butler stating that fixed rates will edge up due to the inflationary impact of Trump's policies [d594e13f]. The October inflation rate in Canada rose to 2.0% from 1.6%, and the federal government plans to mail $250 to 19 million Canadians, which could further add inflationary pressure [d594e13f]. As variable rates are expected to become more popular with potential cuts from the Bank of Canada, Ben Rabidoux noted an uptick in variable-rate mortgages, while 3- and 4-year fixed terms remain popular [d594e13f].
As the Canadian housing market continues to evolve, the implications of Trump's election on mortgage rates and the economy will be closely monitored, particularly as new policies and economic conditions unfold [fb951592]. Additionally, U.S. bond yields are expected to rise, further affecting Canadian mortgage rates [018acf35]. The geopolitical risks associated with these developments could destabilize the global economy, leading to adjusted forecasts for interest rates and commodity prices [018acf35].