Three-year fixed rate provides some certainty for remaining Trump years, at least

In the wake of Donald Trump's re-election, Canadian mortgage holders are facing a shifting financial landscape. The U.S. election outcome has led to a surge in bond yields, which directly influence fixed mortgage rates in Canada. This development has prompted many Canadians to consider locking in three-year fixed mortgage rates to secure some financial stability during the uncertain years ahead.

Following the election, bond yields spiked, with Canada's five-year government bond yield reaching a three-month high of 3.11%. This increase has already led some lenders to raise fixed mortgage rates by 5 to 10 basis points. While the Bank of Canada is expected to continue cutting its key interest rate, these cuts primarily affect variable-rate mortgages, leaving fixed-rate borrowers exposed to market fluctuations.

Mortgage experts suggest that three-year fixed rates, currently ranging from 4.09% to 4.24%, offer a balanced approach for borrowers. This term length provides a middle ground between the higher rates of shorter terms and the long commitment of five-year terms. Given the current economic climate, securing a three-year fixed rate could offer Canadians a measure of predictability amidst global financial uncertainties.

The Federal Reserve's recent decision to cut its key interest rate by a quarter-point reflects ongoing efforts to support the U.S. economy. However, Trump's proposed economic policies, including significant tax cuts and increased government spending, could lead to higher inflation and, consequently, higher interest rates. These potential changes underscore the importance for Canadian borrowers to consider fixed-rate options to mitigate future financial risks.

Additionally, the Bank of Canada's recent rate cut to 3.25% aims to bolster the Canadian economy amid global uncertainties. However, the threat of new U.S. tariffs under Trump's administration introduces fresh challenges. These tariffs could impact Canada's economic growth, further influencing mortgage rates and financial planning for Canadians.

In this evolving economic environment, Canadians are advised to assess their mortgage options carefully. Locking in a three-year fixed rate now could provide a buffer against potential rate increases and economic volatility. As the financial landscape continues to shift, making informed decisions about mortgage terms will be crucial for financial stability.