Tariffs have arrived so what happens next?

Impact of Tariffs on Canadian Real Estate & Mortgages

Short-Term Effects:

3-6 Weeks: Noticeable impact but not devastating.

3 Months: Federal and Provincial Government programs may subsidize manufacturing and auto industries. Banks and insurers to assist those unable to make mortgage payments due to job loss. Significant drop in mortgage rates, especially variable.

Predicted Rate Drops:

March 12 Meeting: Decrease in overnight rate by 0.50%.

Next 6-9 Months: Emergency cuts may lower the overnight rate from 3% to 1.5% or even 1%. Variable Rates: Preferred choice; Prime rate could drop to 3.7%, bringing variable rates below 3%.

Fixed Rates: Expected to drop by 0.50% to 1% over the next year.

Focus on Employment:

Lenders to scrutinize job security in industries exposed to tariff-based layoffs.
Tightening of risk, minimal exceptions to debt service ratios.
Clients may be pushed to alternative lenders with longer amortizations (35-50 years).

New mortgages challenging for those in vulnerable sectors like auto parts manufacturing. Multiple income verifications required.

Real Estate Market:

Potential slowdown in sales, especially in Ontario and Quebec, due to economic uncertainty.

Rents likely to fall, mostly in the GTA and areas affected by manufacturing and auto industries.

Condo Market:

Toronto prices to drop further. Increased vacancies and falling rents as people move in with family or friends.

Long-Term Effects:

NAFTA likely to be re-written to favor the USA, with market normalization taking a year or longer. Hoping for a short period of trade disruption and displacement.