Are Mortgage Rates Going to Drop in 2025?

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Are Mortgage Rates Going to Drop in 2025?

Rodney S • February 4, 2025

Are Mortgage Rates Going to Drop in 2025? How U.S. Tariffs Could Impact You

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.

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.

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Capital Gains Tax Rules: Are They Changing?

By Rodney S • January 16, 2025

With all the uncertainty surrounding Canada’s proposed capital gains tax changes, many property owners are asking, "Do I have to pay capital gains if I sell my house?" or "Should I sell my investment property before the tax rules change?" In June 2024 , the federal government proposed increasing the capital gains inclusion rate —the portion of capital gains that is taxable. This change could significantly impact investors and property owners selling secondary residences, rental properties, or cottages. But here’s the challenge: the rules haven’t been finalized yet. As Jamie Golombek explains in a recent Financial Post article, “ Uncertainty remains as to what the final capital gains tax rules will look like, or even if they will be implemented at all. ” Despite this uncertainty, the Canada Revenue Agency (CRA) has announced it will proceed with collecting taxes based on the proposed higher inclusion rate until a final decision is made. This means that even if you sell now, you could still face a larger tax bill. If the rules are later changed or rejected, the CRA may adjust tax filings—but in the meantime, selling could cost you more than you expect. The good news? Selling isn’t your only option. If you need access to cash or want to better manage your finances, refinancing or exploring alternative lending solutions could provide the flexibility you need—without triggering a large tax bill. Ways to Access Cash Without Immediately Selling If you need funds but aren’t sure whether selling is the best choice, here are some flexible ways to access cash while holding onto your property: 1. Refinancing Your Mortgage ● Access tax-free cash by using your home equity. ● Adjust your mortgage terms to fit your financial needs. ● Keep your property and continue building long-term wealth. 2. Alternative and Private Lenders ● Flexible lending options with easier qualification. ● Quick access to funds without selling your property. ● Short-term solutions to manage cash flow. 3. Reverse Mortgage (For Canadians 55+) ● Access tax-free equity with no monthly payments. ● Stay in your home while improving cash flow. ● Ideal for retirees on fixed incomes. 4. No-Payment Loan Options ● Interest-only or deferred payment loans. ● Manage expenses without immediate financial pressure. ● A flexible option to bridge financial gaps. Comparing Your Options: Sell or Keep Your Property? It’s important to weigh the pros and cons before making a decision. Here’s a simple comparison of selling versus other financing strategies:

Understanding 30 Year Amortization

By Rodney S • December 2, 2024

When it comes to financing a home, amortization is a key term mortgage brokers often discuss. While shorter amortization periods are common in Canada, the concept of a 30-year amortization has gained traction among some buyers and brokers.

Buying a Home in Canada: A Guide for Newcomers

By Rodney S • October 16, 2024

Moving to a new country is a big step, and finding a place to call your own can make settling in even more rewarding. For newcomers to Canada, the journey of purchasing a home can feel both exciting and overwhelming. This guide is here to help you navigate the process of buying a home in Canada, providing a clear roadmap and essential tips to make your homeownership dreams a reality.

A look into 2025.

By Rodney S • August 15, 2024

2025 Reality Check: It’s not good. The Canadian real estate market is on the cusp of a significant shift. As we approach 2025, homeowners, especially investors and those with second homes purchased during the COVID-19 pandemic, face a challenging reality. Rising interest rates are set to dramatically increase mortgage payments, potentially making those once-affordable properties a financial burden.

The Impact of Rising Interest Rates

By Rodney S • August 1, 2024

As we navigate through 2024, the Canadian mortgage and real estate market faces a dynamic landscape marked by rising interest rates. This trend, driven by the Bank of Canada's efforts to curb inflation, has significant implications for homebuyers, homeowners, and real estate professionals. Understanding these changes is crucial for making informed decisions in this evolving market.

Financial Freedom: How The Rich Get Richer

By Rodney S • July 15, 2024

What does financial freedom mean to you? It's a question that might elicit a wide range of responses, and that's the beauty of it – financial freedom is a deeply personal concept.

Finding Your Perfect Home Type

By Rodney S • April 18, 2024

When it comes to finding your perfect home, there are so many more options for potential homeowners! From a single-family dwelling to a townhouse to a modular home, the choices are seemingly endless. But, before you start widening your search, let’s take a look at what makes these home types different - and which one is perfect for you!