Trade War Escalation Fuels Fixed Mortgage Rate Worries

The recent escalation of the US-Canada trade war is expected to put upward pressure on fixed mortgage rates in Canada, as the Bank of Canada's benchmark interest rate remains unchanged.

Government of Canada bond yields have been rising, and a surge in US Treasury yields could intensify this trend. Dominion Lending Centres Group chief economist Sherry Cooper warned that bond market jitters south of the border may impact Canada's rate outlook.

'Another question mark is interest rates and market-driven interest rates,' Cooper said. 'Last week, we saw a rise in US long-term interest rates, thanks in large measure to inflation fear, but mostly the $40 trillion worth of US government debt and very, very strong corporate borrowing by AI-related firms.'

Inflation concerns are on the rise across both Canada and the US, with spiking oil prices and the tariff war potentially inflaming that outlook further. 'It's just a very dicey scenario,' Toronto-based mortgage broker Micky Khaneka said. 'If the tariffs... keep continuing to push costs over, it will eventually lead to higher inflation, which would then eventually put upward pressure on bond yields, then pushing fixed rates higher.'