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What a Sixth Bank of Canada Interest Rate Cut Could Mean for Mortgages as Tariffs Loom

This is an article from Yahoo Finance Canada, I am simply copying and pasting for your information. I will have no input or opinions at this time on what happens tomorrow, with the expected rate cuts. 

Story by John MacFarlane

A series of five consecutive Bank of Canada (BoC) interest rate cuts through 2024 has offered some relief to mortgage holders and at least a flicker of movement in the housing market, but U.S. President Donald Trump’s tariff threat might blunt the effects of another rate reduction on household budgets.

A cut Wednesday is likely to be “greatly overshadowed” by a possible Canada–U.S. trade war, says Justin Herlick, CEO and co-founder of Pine, a digital mortgage and real estate platform. 

In December, BoC governor Tiff Macklem characterized the potential tariffs as "a major new uncertainty.” The Bank’s path forward after Wednesday’s announcement — and the future of its overnight rate and consequent lending rates for consumers — is far from clear, dependent on factors including the scope of U.S. tariffs (if any), the extent of a Canadian retaliation, and the timeframe.

“Let's say they impose these large tariffs and the Canadian government responds, as they have communicated, with counter tariffs,” Herlick said in an interview with Yahoo Finance Canada. “That's going to be largely inflationary, right? And if it's largely inflationary, then the Bank of Canada won't be able to cut as per its plan, which will leave mortgage rates higher.”

The price increases associated with a trade war, however, would “almost certainly come alongside a sharp rise in the unemployment rate,” Desjardins Group economist Royce Mendes wrote in a note on Monday, “driving home the need to ease rather than tighten financial conditions. Rates might ultimately come down, but in the context of a wounded economy."

“There are just many unknowns right now,” said Clay Jarvis, a real estate expert at Nerdwallet Canada. “And I think because they're unprecedented, something like a trade war with the U.S., a lot of home buyers haven't lived through something like that. And we haven't really seen an unleashed Donald Trump and what he could do to the Canadian economy.”

With that said, ongoing evidence of Canadians’ cost-of-living struggles, in the form of data on loan payments and credit risk, suggests consumers are likely to remain hesitant even without a tariff threat, Jarvis tells Yahoo Finance Canada.

“If people are missing their car payments or falling behind on their credit cards, I question whether those people are ready to take on a multi-hundred-thousand-dollar mortgage,” he said. “I don't think a minimal cut from the Bank of Canada is really going to change the game for anybody. It might still have that little bit of psychological value or ‘Hey, rates are coming down, things feel good.’ But in terms of affordability and making things easier for buyers in that regard, I don't think a minimal cut to variable rates is going to do much for them.”

The five consecutive cuts from Canada's central bank since June 2024 have reduced the policy rate from five per cent to 3.25 per cent. Those cuts have reduced monthly payments on a $600,000 variable-rate mortgage by about $630. A cut Wednesday would trim around $90 more from the monthly payment.

Both Jarvis and Herlick say competition among lenders is high right now, meaning anyone looking to buy a home or renew should shop around. “If you just take blatantly your blind offer from your existing mortgage lender, you are likely getting a significantly worse offer than what's out there,” Herlick said.

If the BoC’s rates continue to drop, Herlick adds, it could even create a situation where someone who renewed last year might be better off breaking that mortgage and paying the penalty. “Normally, it's not really worth it to break a fixed mortgage mid-term,” he said. “However, given how high rates were about seven months ago, and where they're going into, it could actually make sense.”

Fixed-rate mortgages, which are priced in line with the bond market rather than central bank rates, haven’t moved much in recent months, and have “already adjusted” for the expected Wednesday cut, Herlick says. “So with this one, you're not going to get a lot of relief on fixed-rate mortgages.”

Two-thirds of Pine’s business is made up of people looking at variable-rate mortgages, Herlick adds, which stands out against a historical preference in Canada for fixed-rate loans. 

“So we're in a time where people are trying to anticipate a cut environment," he said. “I wouldn't say we're feeling direct nervousness of the trade implications, but what we are and have been feeling for over a year now is just people who are very worried about their household expenses, as they have to adjust to the new reality of where interest rates are now.”

Even the emergence of a tariff fight with the U.S. wouldn’t necessarily crush the housing market, Jarvis says. “Canadians are really driven by FOMO when it comes to housing,” he said. "If economic conditions emerge that lead to interest rates dropping substantially further, people would likely buy in spite of the situation."

“If it became cheap to buy a house, people would do it,” he said. 

“I mean, we saw it during the pandemic. We were in the middle of a recession and a completely unprecedented pandemic that nobody's ever dealt with, but still we'll go out and buy a million-dollar house.”

You can find the full article here: What a sixth Bank of Canada interest rate cut could mean for mortgages as tariffs loom

Chris

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Trump Tariffs. How will they Impact Alberta?

The political uncertainty in Canada right now is unparalleled in my adult lifetime. We are in literal limbo with a major trade dispute brewing, a non functioning government, and a Liberal party that seems to be using it as a political tool while they figure out who they want to lead them into the next election, which is looking more and more likely to happen in the fall now. None of this is good for anyone, outside of maybe the Liberals who can possibly gain some support on this wedge issue as they find a new leader. 

It will impact this region greatly, and from my view right now, in no way positive. How so? I will lay it out below. 


1. Energy Sector Challenges

  • Alberta exports most of its oil and natural gas to the U.S., so any tariffs or restrictions could increase costs for American buyers, making Alberta’s oil less competitive.

  • If the U.S. increases domestic oil production or prioritizes American energy (e.g., encouraging more fracking), demand for Alberta oil could decline.

  • The U.S. has previously discussed higher tariffs on imported oil to protect its own producers, which could directly harm Alberta’s oil industry.

2. Higher Costs for Businesses & Consumers

  • Many Alberta businesses rely on imported materials from the U.S., such as:

    • Construction materials (steel, aluminum, lumber)

    • Machinery and equipment

    • Automotive parts

    • Agricultural supplies

  • If tariffs increase the cost of these imports, businesses may pass higher costs onto consumers, making housing, food, and transportation more expensive.

  • Alberta relies on trade and foreign investment, so economic uncertainty caused by tariffs could slow business growth.

3. Agricultural Industry at Risk

  • The U.S. is a major buyer of Alberta beef, pork, and grain. If tariffs or trade restrictions make Alberta products more expensive, U.S. buyers might switch to domestic suppliers or other countries.

  • If Canada retaliates with tariffs on U.S. products, Alberta farmers might face higher costs for farm equipment, fertilizer, and feed.

  • The livestock industry (especially beef and pork) could be hit hard if U.S. protectionist policies favor American farmers.

4. Manufacturing and Tech Sectors Could Suffer

  • Alberta's manufacturing sector depends on U.S. markets and supply chains. Tariffs could make Alberta-made goods less competitive, leading to:

    • Job losses

    • Decreased investment in new production facilities

    • Slower growth in industries like petrochemicals and high-tech manufacturing

  • Technology startups and innovation hubs in Alberta also rely on global trade and U.S. partnerships. Tariff uncertainty could make investment harder to secure.

5. Currency Fluctuations and Investment Uncertainty

  • If tariffs disrupt trade, the Canadian dollar (CAD) could depreciate against the U.S. dollar.

    • This could make imports more expensive (bad for businesses)

    • It might help exports but also make foreign investment riskier

  • Investors prefer stable markets, and ongoing trade tensions with the U.S. could scare away investors from Alberta’s energy and business sectors.

The current “Team Canada” assembly in Ottawa wants to respond in kind with tariffs of their own. While I am not going to pretend to be a trade expert, there are many risks with this approach as well.

1. Higher Costs for Alberta Businesses

When Canada imposes tariffs on U.S. goods, it makes imported materials more expensive for Alberta companies that rely on them. Some key areas of concern:

  • Construction & Real Estate – Many Alberta builders and developers import materials from the U.S., including lumber, steel, drywall, and appliances. If tariffs increase costs, home construction becomes more expensive, pushing up real estate prices and slowing new developments.

  • Manufacturing & Energy – Alberta’s oil and gas sector depends on U.S. machinery and equipment. If those products become more expensive due to tariffs, energy companies may face higher operating costs, making projects less profitable.

  • Automotive Industry – Car dealerships and mechanics in Alberta import many parts from the U.S. Tariffs could drive up vehicle repair costs and make new cars more expensive.

Example:
In 2018, Canada placed retaliatory tariffs on U.S. steel and aluminum, which raised construction and manufacturing costs in Alberta. If similar tariffs return, it could hurt industries that rely on American imports.


2. Alberta Farmers & Ranchers Could Struggle

The agricultural sector in Alberta is heavily dependent on U.S. trade for both exports and imports. Retaliatory tariffs could lead to:

  • Higher costs for farm equipment & feed – Many Alberta farmers buy U.S.-made tractors, machinery, and animal feed. Tariffs would make these essentials more expensive, reducing profitability.

  • Reduced market access for Alberta beef & pork – If trade tensions escalate, the U.S. may restrict imports of Canadian beef or pork, reducing Alberta’s sales.

  • Disruptions in grain trade – Alberta exports wheat, barley, and canola to the U.S. If tariffs slow cross-border trade, Alberta farmers could lose key buyers.

Example:
During past trade disputes, U.S. buyers have sourced beef from other countries (like Australia) instead of Alberta, hurting ranchers.


3. American Retaliation Against Canada’s Retaliatory Tariffs

If Canada retaliates too aggressively, Trump could double down on tariffs, making the situation even worse. This could mean:

  • Higher tariffs on Alberta oil & gas – The U.S. could impose new energy tariffs, making Alberta’s oil more expensive and reducing exports.

  • Increased costs for Alberta consumers – If the trade war escalates, Alberta residents could see higher prices on food, cars, and household goods.

  • Economic slowdown – Retaliatory tariffs can lead to reduced investment, job losses, and uncertainty, hurting Alberta’s economy in the long run.

Example:
In 2018, Trump threatened tariffs on Canadian auto exports during a trade dispute. A similar move in 2025 could be devastating for Alberta’s economy.


4. Retail & Consumer Goods Will Become More Expensive

Many everyday products in Alberta come from the U.S. or contain American materials. If Canada imposes tariffs, these items could see price hikes:

  • Groceries – Alberta imports U.S. fruits, vegetables, and processed foods. Retaliatory tariffs could make food more expensive.

  • Clothing & electronics – Many consumer goods come from U.S. retailers or use American-made components. Prices could rise.

  • Alcohol – If Canada reintroduces tariffs on U.S. whiskey, wine, or beer (as it did in 2018), Albertans could pay more for imported drinks.

Example:
During the last tariff dispute, prices for U.S. ketchup, whiskey, and processed foods went up in Canada, hurting businesses that rely on these imports.

In conclusion, my opinion is we need a diplomatic approach. This all out battle benefits no average citizen of this country. Tariffs are the tip of the iceberg in what could be a tumultuous 4+ years with our neighbors to the south. Trump wants companies to move there, manufacture there, and create jobs there. If we cut off our oil, they may refit their refineries on the gulf coast, who can currently process our heavy oil (which is more expensive to do, which is also why we sell at a discount) to refine other oil from other parts of the world, or right in their backyard which would be disastrous. 

We never should have gotten here, to the point where we were so reliant on one country who knows they have us. Pipelines to the coasts would have alleviated a bit of this burden and not made us so beholden to the US. And this isn’t just about oil, we are an export country and we are going to war with the biggest consumer in the world, who is also our next door neighbor. Call me crazy, but I think someone out there in this country must have the brains to figure out a better strategy. 

I am optimistic this ends well, but with every press conference I watch lately, that hope is fading. 

Chris

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Trudeau Stepping Down, what it means for Grande Prairie and the Country.

Against my better judgement, I am going to weigh in on the news this morning of Prime Minister Justin Trudeau stepping down as the leader of the Liberal Party. I will do that at the end of this post and share my personal thoughts. Which may or may not be a smart thing to do lol. 

First of all, this is a real estate website, so what does it mean for home owners and buyers and in Grande Prairie with this news, here is a quick summary, none of it too earth shattering.

Potential Impacts on Grande Prairie Housing Market

  1. Energy Sector Influence:
    Grande Prairie’s economy is closely tied to the energy industry. A new federal government, particularly one led by the Conservatives under Pierre Poilievre, might prioritize pro-energy policies, potentially boosting local employment and housing demand. Conversely, delays in policy clarity could create temporary uncertainty.

  2. Interest Rates and Lending:
    Changes in federal fiscal policies could indirectly influence interest rates set by the Bank of Canada. Grande Prairie’s housing market, where many buyers rely on mortgages, might experience shifts in affordability if borrowing costs fluctuate.

  3. Population Growth and Immigration:
    Grande Prairie’s population growth, driven by affordability and job opportunities, could be influenced by changes in federal immigration policies. This might either increase demand for housing or slow it if new policies reduce immigration inflows.

  4. Federal Infrastructure Spending:
    Investments in infrastructure are critical for Grande Prairie’s growth. A leadership change might either enhance or reduce funding for local projects, impacting the economy and the housing market. Under the current government, the red tape on housing starts was cumbersome, hopefully a new government will eliminate some of these barriers. 

Actionable Insights for Grande Prairie

  • For Buyers: Lock in mortgage pre-approvals now to mitigate the risk of rising rates. Political uncertainty can lead to economic fluctuations, making it wise to secure financing early. If they drop you can get a new rate, but if they rise, you are locked in at the better rate.

  • For Sellers: Consider listing your property earlier than you planned. Market sentiment may shift as federal policy direction becomes clearer, potentially affecting demand. Although this is tough to predict regardless of what happens. My personal opinion, not a lot will change on the housing market side in the short term, but you never know.

  • For Investors: Keep an eye on federal leadership changes, particularly policies impacting energy, immigration, and infrastructure, as these will influence Grande Prairie’s economic stability and housing market.

The leadership race and potential policy shifts may have significant implications for Grande Prairie’s housing market, particularly through their impact on the energy sector, lending environment, and infrastructure investment. Staying informed and proactive will be essential in navigating these changes effectively.

Now for my thoughts on this mornings news:

For the Conservative Party and Canadians as a whole. I don’t think this is a huge win, or even a win at all, as of today at least. Trudeau running again was a best case scenario for the Conservatives going into a 2025 election. The country and his party have tired on him and turned their backs on his leadership. Who will replace him? My guess would be Mark Carney, he has an economic background and that would be something he could go head to head with Pierre Poilievre on and actually be informed and knowledgeable about. I still think the Conservatives win in a large majority, but not as large as it would have been had Trudeau not made this announcement. Chrystia Freeland will also most likely throw her hat into the leadership race, but my guess is the Liberals will want to distance themselves from anyone closely tied to the Trudeau Government, and she has been a co-face of it for the last half decade or so.  There are several other names, but none of them will get very far in my opinion. Those two are the ones you will probably hear the most in the coming weeks.

My biggest issue with all of this, is we now have a Prorogued Parliament, until the Liberals find a new leader. Canadians in the meantime get to sit in limbo while the Liberals try and right their ship. While this is nothing new in politics. Governments have done this in the past, regardless of party, and will continue to do so in the future when it suits their needs. The problem this time, is we have Donald Trump coming into office in two weeks. He has taken a hard stance against Trudeau and stood up for America first policies in the past, and has a clear mandate to do that again this time around. No matter what side of the political spectrum you sit on, it should be evident we need a leader running the country who has a four year mandate of their own negotiating and dealing with what is coming from our neighbors to the south, or at the very least a path to one. Whether that be an election immediately (which is never going to happen). Or more astutely, the Liberals and Trudeau should have made this call months ago and started this process sooner. They could have been prepared for this and wouldn’t have to hold Parliament hostage for the next two and a half months while they try to save their jobs, and Canadians face a potential trade/tariff war with the US that we can’t react to adequately in the meantime.

Once Trump takes office, there should have been a leader facing off with him, representing Canada with either a four year mandate, or like I mentioned a path to one in the future (a Liberal candidate who was prepared for an election after a rigorous vetting process and one their electorate wants. One who was settled and voted on over the previous six months, not someone who is thrown in last minute with this news today and will most likely be too late to the party to run an effective, successful campaign). Instead we get Trudeau, who is finishing up his round and driving the golf cart to the 18th hole at the Country Club, and he stopped writing his score down several holes ago. Trumps first few months in office are going to have a massive impact on Canada, and this is something a government should have been keenly preparing for with laser like precision and a plan of action on how to react for January 20th. Instead we are faced with a Prorogued Parliament until March 24th while the current government decides which way they want to go, and what is best for them in their immediate future.

The coming months will be interesting, toxic, and by the end we will all be ready for it to be over I’m sure. The writing has been on the wall for awhile with Trudeau & the Liberal Party, and I wish they put country over party a long time ago. They didn’t, and here we are. We have frozen Parliament two weeks before Trump takes office, who has threatened 25% tariffs on the country, which will have a massive impact on the economy, not just here in Grande Prairie, but all over Canada.

No matter what side of the political isle you sit on, no party should put their jobs over the Country. And all of them have, this isn’t just a Liberal issue, it’s a systematic one that all governments do, no matter the color. And we the taxpayer, once again get to foot the bill. 

Chris

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