Mortgage Rate Outlook

It’s Florencio, your trusted REALTOR®, bringing you the latest insights on mortgage rates from the British Columbia Real Estate Association (BCREA). Since the 2024 U.S. presidential election, the bond market has been quite the rollercoaster, reflecting uncertainty about the Trump administration’s follow-through on its campaign promises. That volatility hasn’t let up, fueled by the stop-and-start nature of U.S. tariff policies and a generally unpredictable approach to decision-making.

With uncertainty still running high, markets seem to be preparing for some level of tariffs sticking around over the next year, which is casting a shadow over the economic outlook. As a result, the Government of Canada five-year bond yield appears to be settling between 2.6 and 2.75 percent. This suggests the Bank of Canada may have room for a few more rate cuts. Should U.S. tariffs on Canadian imports persist, we could see yields drop further as investors turn to safer assets in these uncertain times.

What does this mean for five-year fixed mortgage rates? Initially, rates might tick up slightly as lenders account for the heightened economic risk. However, that pressure should ease, and rates could trend lower if the Bank of Canada takes decisive action to support the economy. There’s a catch, though—retaliatory tariffs on U.S. imports could push inflation higher. According to the BCREA, a trade war might add roughly 0.5 points to inflation compared to a no-tariff scenario. If inflation runs hotter than the Bank of Canada’s comfort zone, it could limit how much the bank can do to bolster growth.

Our forecast at the BCREA suggests the Bank of Canada will lower its policy rate to 2.5 percent, though tariff-driven inflation might keep it from going further. For the average uninsured five-year fixed mortgage rate, we’re looking at around 4.35 percent. That said, this outlook carries more uncertainty than usual—there are a lot of moving pieces to watch.

As your REALTOR®, I’m here to help you make sense of these shifts and what they mean for your real estate plans. Whether you’re buying, selling, or just exploring your options, feel free to reach out.